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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Opinion

Matter of fairness

The Spokesman-Review

If you’re a Washington state resident who wants to save a significant sum of money, there are two steps you ought to consider: Looking into taking the deduction for state and local sales taxes on your federal filing form and clamoring for that deduction to be permanent.

No need to feel greedy, because getting that annual deduction merely puts you on equal footing with residents in 43 other states.

The sales-tax deduction used to be a fixture in Washington state, but in 1986 it died when Congress passed income tax reform. The deduction wasn’t revived until 2004, but it carried an expiration date.

Last year, Congress granted an extension for 2007. Recently, the House passed a tax package that includes an extension for 2008. But this ad hoc tax policy is senseless. If Congress is convinced that the deduction has merit, then it ought to adopt a permanent fix.

Led by U.S. Rep. Brian Baird, a Democrat, the entire Washington state delegation has pushed bills that would accomplish that, but the cold calculus of Congress stands in the way.

Seven states do not have an income tax and therefore lack the usual vehicle to deduct state and local taxes. Representatives of the 43 states with income taxes have little incentive to change the law. That’s why the residents of Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming need to join forces and become noisy advocates for a permanent change.

There is a lot of money at stake. Washington state tax filers who itemize can save $500 on average, according to the state Department of Revenue. In 2005, residents saved $391 million in federal taxes. An estimated $437.5 million could be saved in 2008. That additional cash flow boosts the state’s economy.

But not everyone who could take advantage of the deduction does so, in part because of its uncertain status. Some might think that it has expired. Some might not be aware that it has returned. It takes time for word to circulate. The Department of Revenue notes that many more people could be taking the deduction. There was only a 1 percent gain in filers taking the deduction between 2004 and 2005.

Given the odds, it’s impressive that representatives of the seven states have been able to secure the deduction, even temporarily. Then again, simple fairness can be a powerful argument. There is no justification for giving favorable treatment to states based on their tax codes.

Congress needs to make the deduction permanent.