Another volley has been launched at the temporary status of the sales tax deduction on federal income tax returns. Once again, it comes from a Washington lawmaker.
Rep. Doc Hastings, R-Pasco, filed a bill with Rep. Jeff Miller, R-Fla., Tuesday that would make permanent a sales tax deduction written into the federal tax code. Current law, solidified in last year's fiscal cliff deal, extends the deduction through next year only. Meanwhile, taxpayers enjoy the income tax deduction on a permanent basis.
Like others before him, including Sen. Maria Cantwell, D-Wash., who authored similar legislation across Capitol Hill in January, Hastings argued the issue is one of fairness for states that collect no income tax.
“Residents of states that do not collect income taxes, like my home state of Washington, should be allowed to continue to deduct their state sales taxes from their federal income tax obligations each year without relying on short term extensions of the law,” Hastings said in a prepared statement Tuesday announcing the bill.
Florida, Washington and seven other states, encompassing 20 percent of the country's taxpayers, do not collect income tax, Hastings said. The subject is a sore one for Washington legislators on both sides of the aisle who watched the window shut on the deduction for 20 years through the 1980s, '90s and early 2000s.
The sales tax deduction was written out of the tax code in 1986 as part of President Ronald Reagan's efforts to simplify the law. Instead of writing out all local tax deductions, per Reagan's wishes, Sen. Bob Packwood, an Oregon Republican, managed to work the income tax deduction back as chairman of the Finance Committee during the drafting process. Then-Sen. Slade Gorton, R-Wash., called the outcome in which the sales tax deduction was eradicated and the income tax deduction made permanent “one of the unhappy elements in my Senate career.”
Though President Barack Obama made a similar commitment to enacting tax reform in his State of the Union address this year, Hastings and Cantwell have a tough hill to climb. Cantwell's proposal has yet to get a hearing in the Senate's Finance Committee, chaired by Sen. Max Baucus, D-Mont., and proposals in the past from Hastings and Rep. Cathy McMorris Rodgers, R-Spokane, have languished in House committees.