12.09.05

Cantwell’s Tax Cut Clears House

Sales Tax Deduction Timely for Holiday Shopping Season; Cantwell continues fight to make tax cut permanent

WASHINGTON, DC – Senator Maria Cantwell (D-WA) applauded the House’s approval late Thursday night of a one-year extension of the state sales tax deduction, previously set to expire on December 31. The Senate approved similar legislation earlier this fall, extending this important tax cut through 2006. Cantwell also renewed calls for a permanent extension of the deduction.

"Adding another year of this tax cut for Washington state’s taxpayers is good; making it permanent is my goal," said Cantwell. "Without this tax cut, Washingtonians get taxed twice—once when they make a purchase and again when they file their tax returns because they can’t deduct the sales tax they already paid. I will continue the fight to make the deduction permanent. Washingtonians deserve tax fairness."

In 2004, Cantwell worked with a bipartisan group of Senators and Representatives to pass legislation allowing Washington state residents to deduct the state and local sales taxes from their annual federal income tax returns. Under the Cantwell provisions, Washingtonians claimed deductions totaling almost $2 billion on their 2004 returns. However, the deduction, passed and signed into law as part of the American Jobs Creation Act of 2004, applied to 2004 and 2005 only.

Earlier this year, with this important tax cut about to expire, 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. Thursday’s one year extension, passed as part of the House Budget Reconciliation bill, is an important part of Cantwell’s efforts to promote tax fairness and provide an important boost to retailers and taxpayers statewide next year. The extension still must gain final approval in Congress and must be signed into law by the president before taking effect.

In most other states, taxpayers are allowed to deduct state income tax from their total income taxed by the federal government. However, residents of states with a higher sales tax in place of state income taxes have not been allowed a sales tax deduction since changes to the tax code were made in 1986.