02.03.06

Cantwell’s Tax Cut Clears Senate Again

Senate extends tax deduction through 2007; Senator continues fight make deduction permanent

WASHINGTON, DC – Senator Maria Cantwell (D-WA) applauded the Senate’s approval Thursday night of a two-year extension of the state sales tax deduction, previously set to expire at the end of the 2005 tax season. Cantwell, who introduced the deduction, also renewed her call to make it permanent.

“Adding another two years to this important tax cut will promote tax fairness and put hard-earned cash back into the wallets of Washington state’s consumers,” said Cantwell. “This extension is great news; making it permanent is my goal. Washingtonians deserve tax fairness. Without this tax cut, Washingtonians get taxed twice—once when they make a purchase and again when they file their taxes.”

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.

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 for the first time since 1986. The deduction was set to expire at the end of 2005. Cantwell’s sales tax deduction, passed by the Senate Thursday night as part of the Tax Reconciliation bill, would allow Washingtonians to continue deducting state and local taxes through the 2007 tax year. The House passed the deduction Wednesday night. The extension still must gain final approval in Congress and must be signed into law by the president before taking effect.

Washingtonians claimed $2 billion in deductions on their 2004 returns under the Cantwell provisions, with taxpayers who took advantage of the cut saving an average of over $500 each. The Washington state Office of Revenue Forecast estimates that the deduction will create between 2,000 and 3,000 new jobs and more than $200 million in economic stimulus.

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