Deduction for sales tax should be permanent

The following editorial, which does not necessarily reflect the opinions of The Spokesman-Review editorial board, appeared Friday in the Yakima Herald-Republic.

The good news is that Washington taxpayers who itemize their federal tax returns will now be able to take a deduction for state sales taxes. The bad news is that Congress approved the tax break only for the 2004 and 2005 tax years.

But there’s hope for the long haul. A spokeswoman for U.S. Sen. Maria Cantwell, who was an original sponsor of the legislation, said a renewed effort will be made in two years to make the deduction permanent. The provision for the sales tax deduction was part of an omnibus measure called the American Jobs Creation Act (HR4520).

The two-year limit has never made sense, and it contributed to a partisan standoff in the House of Representatives in June. All six House Democrats from Washington state opposed the limit, including Rep. Brian Baird, D-Vancouver. Baird sponsored similar legislation last year, which was co-sponsored by 4th District Rep. Doc Hastings, a Pasco Republican.

Baird said the Democrats wanted to hold out for permanent status. Republican George Nethercutt, the 5th District representative, said at the time the bill was not perfect: “But you can’t wait for the perfect, you have to go with the good. Once it’s in place, it won’t be repealed.”

Nor should it be. This is a matter of basic fairness in taxation.

Taxpayers in states such as neighboring Oregon, which has an income tax but no sales tax, are allowed to deduct what they pay to the state from their federal returns, reducing their overall tax burden.

Before 1986, taxpayers were permitted to deduct most state and local taxes when computing their federal tax liability. Federal tax reform legislation approved that year adversely affected residents of several states, including Washington, by eliminating deductions on state and local sales taxes but not on state income taxes. …

As we have said in this space before, the sales tax deduction is a matter of fair play. It makes no sense that citizens in 41 states can deduct a significant state tax while those in eight cannot. (New Hampshire wouldn’t benefit from a choice between deducting state income taxes or state sales taxes; it has neither.)

For now, we’ll settle for the two years to get things going. But state taxpayers have every right to expect it to be made permanent for the 2006 tax year and beyond.