On Tuesday Washington's Gov. Chris Gregoire, along with several other governors from across the country, sent a letter to lawmakers in Washington D.C. asking for an extension of the state and local sales tax deduction - a money-saving convenience available to those who file itemized federal tax returns. Lobbying for the deduction has become a fairly regular event over the years; it was off the books from 1986 through 2004, but has been active - with the help of politicians from our state and others - since that time. Most recently Congress approved an extension for the 2010 and 2011 tax years, but, as the Associated Press noted yesterday, Congress would need to do so again to extend the deduction for 2012 and beyond.
Like a small handful of other states in the country, Washington has no state income tax. Instead funds are raised through a sales tax, the rate of which can be complex and vary by location or municipality. Overall Washington has one of the higher sales tax rates in the nation.
Proponents of the sales tax deduction, including Gregoire and Sen. Maria Cantwell, say it prevents Washington residents from being hit with a double whammy. As Cantwell says of the deduction on her website, its purpose is to keep Washingtonians from "being subjected to the double taxation of funds that have already been collected by the state to finance state services."
According to the AP, Gregoire was joined in her letter-signing efforts by the governors of Florida, South Dakota, Tennessee, Texas and Wyoming - all states without a state income tax that potentially benefit from the sales tax deduction.
Cantwell, who doesn't hesitate to remind voters of her almost yearly efforts to protect and preserve the sales tax deduction, would nonetheless like to see a day when lawmakers in D.C. can focus on other things.
As Cantwell explains on her website:
There is no reason why this sales tax deduction issue needs to be an annual legislative battle. We should make it permanent. The deduction helps our state's working families and our region's economy; it refunds money to Washington residents, creates jobs, and stimulates economic growth by keeping money in the state.
Citing numbers from the IRS, the Tri-City Herald reports that nearly 850,000 Washington residents used the deduction in 2009, reducing their taxable income by over $1.8 billion.
Cantwell estimates the deduction saves an average of $500 for those who take advantage of it.