The House included language extending the sales tax deduction for another year in the Renewable Energy and Job Creation Act, which passed the House 263-160.

The $54 billion tax package, which renews dozens of expiring tax breaks, is intended to ease the economic strain on homeowners and businesses and reduce the nation’s dependence on foreign oil.

But House Republicans opposed the bill, in part because it would pay for the measure by closing a tax loophole for some corporations. Also, the White House has threatened to veto it if it survives in the Senate and makes it to President Bush’s desk.

The sales tax deduction saves Washington families who itemize their deductions more than $350 million every year on their federal income tax returns. That money ripples through the economy, resulting in an estimated $530 million in economic activity.

U.S.  Rep. Brian Baird, D-Vancouver, hailed the bill’s passage.

“Since entering Congress, my top priority has been restoring fairness to the tax code and making sure that Washington residents are treated equitably by the tax system,” said Baird, who along with U.S. Sen. Maria Cantwell, D-Wash., has worked for years to make the sales tax deduction permanent.

Baird lobbied the budget-writing House Ways and Means Committee to extend the deduction, which allows residents of states without a state income tax to deduct their estimated sales tax payments from their federal income tax returns.

Last year, Baird worked with members on both sides of the aisle to include a one-year extension of sales tax deductibility in the Temporary Tax Relief Act of 2007.

The measure renews dozens of targeted tax breaks that have expired or will expire soon and provides new tax relief by expanding for a year the refundable child tax credit available to lower­-income families. It allows, for one year, a new deduction of property taxes for non-itemizers, worth up to $700 for a couple.

“It would cut taxes for millions­ of middle-income families,” said House Speaker Nancy Pelosi, D-Calif.  She said 30 million homeowners would benefit from the property tax credit alone.

The bill also extends deductions for the out-of-pocket expenses of teachers and allows tax-free deductions from individual retirement accounts.
To reduce the nation’s dependence on foreign oil, it provides some $17 billion in tax incentives for renewable energy sources such as wind and solar power, carbon capture and sequestration projects, plug-in cars and technology for green buildings. It also provides $8.8 billion over 10 years to renew the research and development tax credit and creates a new category of tax credit bonds to finance state and local government initiatives to reduce greenhouse gas emissions.

House Republicans opposed the bill because it would be paid for by closing tax loopholes and delaying tax breaks for some offshore and multinational corporations.

“This Democrat tax plan is a fool’s bargain that unnecessarily raises taxes by over $50 billion in order to simply extend existing low-tax policies that have expired,” said Rep. Doc Hastings, R-Wash., in a statement. Hastings is from Pasco.

The bill goes now to the Senate, where the sales tax deductibility language could face an uphill road,  “It’s one piece of a very large package,” said Cantwell spokeswoman Ciaran Clayton. “And the threshold is higher in the Senate.”  Sixty votes are needed to bring the measure to the Senate floor.

Cantwell introduced legislation this year in the Senate Finance Committee, on which she serves, to make sales tax  deductibility permanent, and has lobbied Finance Chairman Max Baucus, D-Montana, to pass that bill.

 “Sen. Cantwell is committed to a bill this year,” Clayton said.

Kathie Durbin covers politics and the Legislature. Call her at 360-735-4523 or e-mail kathie.durbin@columbian.com.

The Associated Press contributed to this report.