In Our View: Eight States Need Tax Fairness

Congress should make permanent the deduction of state, local sales taxes

Published:

 

Now that plummeting poll numbers have forced members of Congress into damage control and reputation repair (witness last week’s long-overdue efforts in the Senate to ban insider trading by federal politicians), we’d like to see another simmering pot brought to the front burner. It’s one of those rare issues in which members of both parties could -- and should -- show collaboration and common sense.It’s about the deduction of state and local sales taxes from federal income taxes, currently available to residents of the eight states (including Washington) that have no state income tax. This deduction expired at the end of 2011, and for years Congress has neglected the obvious need to make it permanent. Last Thursday, 14 senators (10 Republicans, four Democrats) sent a letter to Senate leaders urging them to make this a top priority in the Senate this year. (The deduction is available for 2011 tax returns). If those Senate leaders are serious about improving their image and showing fair-minded public service, they’ll follow the recommendation of that letter.

For Washington residents, this deduction in recent years has meant about $500 million in combined savings in federal income tax payments. It’s eminently fair when compared with other states. Oregonians, for example, deduct their state income taxes from federal income tax payments. In fact, nationwide about $236 billion in state and local income taxes are deducted on the federal returns in 42 states. In the eight states including Washington, less than $16 billion is deducted.

Among the letter’s 14 signatories is U.S. Sen. Maria Cantwell, D-Wash. She’s joined by three other Democrats, plus noteworthy Republican Sens. Marco Rubio of Florida, John Cornyn or Texas and Lamar Alexander of Tennessee.

This issue is about tax fairness, and just because most Congress members are not affected does not excuse them from doing the right thing. In fact, they’ve already done the right thing, repeatedly approving the deduction while mysteriously failing to muster the collective courage to make it permanent. For almost two decades, residents of these eight states were unjustly penalized by not being able to deduct state and local sales taxes from federal returns. In 2004, Congress finally remedied that disparity. And now, why repeat the unnecessary drama of arguing over extensions? Congress members should make the deduction permanent, do the right thing for the people involved and save themselves a lot of work down the road by not having to revisit the issue.

Another warrior who belongs in this crusade is U.S. Rep. Jaime Herrera, R-Camas, who supports making the deduction permanent but has yet to show the persuasive power that her predecessor brought to this discussion. And with the increasing strength of Republicans in the U.S. House, this pitch is right in their wheelhouse, because it allows lower tax payments.

Furthermore, making the deduction permanent ought to be a slam-dunk when you consider the states involved. Most are red states; five of the eight states voted Republican in the 2008 presidential election, and one of the three states that did not (Florida) is viewed as red because almost three-fourths of its Congress members are Republicans.

The Senate Finance Committee should heed the advice in last week’s letter. In so doing, they would not only do the right thing for taxpayers, they’d also improve their own image as statesmen.