Our View: Washington needs permanent deductibility
Washington taxpayers are in for another suspenseful fall. Will they or won’t they get to deduct their state and local sales taxes next year when they file their 2008 federal income tax returns?
Once again Congress is going down to the wire over what has become four years of dramatic, year-by-year extensions, generally just before adjournment.
As usual, U.S. Sen. Maria Cantwell, D-Wash., a member of the Senate Finance Committee, is in the thick of things. She was enthusiastic Tuesday in announcing an agreement in the Senate on a plan that includes, among varied provisions, a two-year continuation of the sales tax deduction.
That’s great, but even if the measure fares as well on the Senate floor as Cantwell predicts, it awaits a skeptical reception in the House over a number of the provisions in the multifaceted bill.
The sales tax deduction is important in only eight states – those that impose a sales tax but lack an income tax. It’s no big deal in the other 42 states, because deduction of state income taxes is unthreatened. It is a permanent part of the tax code. But in Washington and seven other states, the deductibility of the main state revenue source has come to depend on an end-of-session ritual.
The deduction means an average of $500 to Washington tax filers, a significant sum in many households. And on an economic impact level, it returns some $437 million to the state. An economic stimulus, you might say.
Why muddy one bill with so many provisions? Why not judge each on its own merits? Ah, but that wouldn’t set up the kind of deal-making Congress can achieve with a bill that includes separate plums for a lot of interests.
Also caught up in the pending measure, for example, is an extension of federal payments to areas where timber harvest revenues have declined on large tracts of untaxed federal land. That’s important in Washington and Idaho.
Other portions of the bill address renewable energy, the alternative minimum tax, child care, mental health treatment and more. Each cause has a constituency.
Washington’s congressional delegation is unanimously behind the sales tax deduction. All the members campaign on their effectiveness for the public’s interest. Every year at this time they employ that effectiveness pursuing another year of equity for Washington.
But the excitement is getting a little, well, taxing. It is time for our senators and representatives to start sooner (right after the next Congress convenes) and achieve more (permanent deductibility).
For now, there’s little we can do but cross our fingers – the ones we’re hanging by.