Plan restores state sales tax deduction

WASHINGTON – Washington state lawmakers declared victory as House and Senate negotiators agreed to a plan that would allow state residents to deduct sales taxes on their federal tax returns.

Lawmakers in Washington and six other states without an income tax have sought the sales tax benefit, which was taken away nearly 20 years ago in another federal tax overhaul.

House and Senate leaders said Monday night the sales tax plan would be included in a complex plan to overhaul corporate taxes and make other changes in the federal tax code.

Tax analysts believe about half of Washington state taxpayers could benefit and supporters of the measure said the typical savings would be $300 to $500, the Seattle Post-Intelligencer reported.

A 41-member House-Senate conference committee faced a tight deadline in trying to resolve hundreds of differences between the House and Senate versions of the bill. Congress aims to adjourn at the end of this week.

House Ways and Means Committee Chairman William Thomas, R-Calif., the conference chairman, presented a chairman’s “mark” on Monday night that will serve as the vehicle to offer amendments. The chairman’s mark will include a two-year provision allowing the sales tax deduction, Thomas said.

Even with that agreement, a fight over whether to regulate tobacco as a drug threatened to scuttle the whole effort.

But Washington lawmakers were not focusing on that as they celebrated a hard-fought achievement.

“I’m glad we’re scoring a victory for the taxpayers in Washington state,” said Sen. Maria Cantwell, D-Wash., who called the issue critically important to state residents.

“For 40-something years they were able to deduct sales tax from federal income tax returns and now they will be able to again,” she said.

Sen. Patty Murray, D-Wash., was slightly more cautious, saying lawmakers were “one step away from making this happen.”

Still, Murray praised Cantwell and Rep. Brian Baird, D-Wash., for pushing the issue over the past several years.

“It’s now in conference and someone would have to offer an amendment to take it out, and that won’t happen,” Murray said, noting that any change to the agreed-upon version of the bill could risk defeat of the entire measure.

Baird, who has made the sales tax deduction a signature issue, said lawmakers in Washington, Texas and other states without an income tax came together, despite partisan and regional differences. The bill also would benefit taxpayers in Florida, Nevada, South Dakota, Tennessee and Wyoming.

“Tonight it appears that after nearly 20 years, tax fairness is on its way to being restored for Washingtonians,” said Rep. George Nethercutt, R-Wash., who has also fought for sales tax deductibility. “… This change will save taxpayers hundreds of dollars, and help spur our state’s rebounding economy.”

“A lot of people basically drew a line in the sand and said, if you want to pass this bill, you need this (sales tax provision) in there,” Baird said. He credited Texas Sen. Kay Bailey Hutchison and Texas Rep. Kevin Brady – both Republicans – as prime movers on the bill.

Baird said he was “95 percent confident” that the measure ultimately would be approved and signed by the president. The bill could come up for a vote in the Senate as soon as today, Murray said.