03.24.05

Cantwell Calls on Budget Leaders to Extend Sales Tax Deduction for Washington State's Taxpayers

Senator asks committees' leaders to maintain tax fairness

WASHINGTON, D.C. – U.S. Senator Maria Cantwell today called on the House and Senate Budget Committees to include an extension of the sales tax deduction through 2010 in next year's budget. Both chambers of Congress included the extension in budgets passed last week, but Cantwell wants to ensure that the deduction is included in the final version of the budget. The deduction, which is set to expire at the end of this year, gives residents of seven states – including Washington State – a tax cut of over $500 per year.

"Tricky things can happen when the House and Senate get together to iron out the differences in the budget," Cantwell said. "I want to remind the committee leaders that this is an issue of tax fairness that is extremely important to the growth of the Washington state economy."

Last October, Congress passed and the president signed into law Cantwell's legislation that allows Washington state residents to deduct state and local sales taxes from their annual federal income tax returns. The legislation was passed for only two years – 2004 and 2005. Earlier this year, Cantwell teamed up with Senate Majority Leader Bill Frist (R-TN) and Senator Kay Bailey Hutchison (R-TX) to introduce a measure in the Senate to make the tax cut permanent.

About 1,240,000 Washingtonian tax filers are expected to benefit from this tax cut. On average, the sales tax deduction will give Washington state residents a tax cut of $519 to $575 per year. The state Department of Revenue estimates that Washingtonians should save $500 million per year, giving the state's economy a substantial boost.

In most other states, taxpayers are allowed to deduct state income tax from their income that is taxed by the federal government. However, until 2004, residents of states that have no state income tax but have a higher sales tax were not allowed a sales tax deduction since changes to the tax code were made in 1986.

Cantwell wrote to the leaders, "I look forward to working with you as the conference committee deliberates a final, FY 2006 budget resolution and thank you for your commitment to ensuring that tax fairness is maintained to residents in all fifty states."

The text of the Cantwell's letter to the Budget Committees follows below:

March 24, 2005

The Honorable Judd Gregg Chairman Senate Budget Committee 624 Dirksen Senate Office Building Washington, D.C. 20510 The Honorable Kent Conrad Ranking Member Senate Budget Committee 624 Dirksen Senate Office Building Washington, D.C. 20510

The Honorable Jim Nussle Chairman House Budget Committee 309 Cannon House Office Building Washington, D.C. 20515

The Honorable John Spratt Ranking Member House Budget Committee 309 Cannon House Office Building Washington, D.C. 20515

Dear Chairman Gregg, Ranking Member Conrad, Chairman Nussle, and Ranking Member Spratt:

I am writing to you in your capacity as leaders on the conference committee that will resolve difference between the House- and Senate-passed budget resolutions. I want to express my strong support for maintaining the extension of the deduction for state and local incomes taxes in the final FY 2006 budget resolution.

Both the budget resolution passed by the House of Representatives and Senate during the week of March 14, 1005 accommodate an extension of the deduction for state and local sales taxes enacted as part of the American Jobs Creation Act of 2004 (Public Law 108-357). As you know, the deduction is only in effect for calendar years 2004 and 2005 juxtaposed to the deduction for state and local income taxes that are not subject to a similar sunset. Reinstating the deduction for state and local sales taxes eliminates any Federal bias regarding the type of taxes a state uses for its revenue source and in order to prevent this inequality, I ask that a permanent extension of the sales and local sales tax deduction be included in the revenue assumptions for the FY 2006 budget.

I look forward to working with you as the conference committee deliberates a final, FY 2006 budget resolution and thank you for your commitment to ensuring that tax fairness is maintained to residents in all fifty states.

Sincerely,

Maria Cantwell United States Senator

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