Updated at 9:47 a.m. to add Harry Reid as co-sponsor:
WASHINGTON — U.S. Sens. Maria Cantwell and Patty Murray are taking another stab to make sales-tax deductions a permanent part of the tax code.
The two Washington Democrats, along with
six seven colleagues, on Thursday evening introduced a bill seeking to end the frequent expirations — and subsequent renewals — for the tax break, which allows filers to subtract state and local sales taxes paid on their federal returns.
The change would most directly benefit residents in Washington and seven other states that do not have state income taxes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming. It also could reduce federal tax liability for taxpayers in other states who choose to claim sales-tax deductions in lieu of income taxes.
Cantwell, who sits on the Senate Finance Committee, has long pushed to make the sales-tax deductions permanent. So have Murray and most other members of the state’s congressional delegation. Sen. Dean Heller, Republican of Nevada, is a lead co-sponsor of the latest legislation. Senate Minority Leader Harry Reid of Nevada signed on as a co-sponsor Friday.
Taxpayers were allowed to claim sales taxes to reduce their federal taxes until Congress repealed the law in 1986. In 2004, Cantwell and other lawmakers helped get it restored, subject to annual renewals. Since then, Congress let sales-tax deductions expire in 2007, 2009, 20011, 2012 and 2013, only to renew it retroactively months or even a year later.
The lapses have bedeviled taxpayers and made it difficult to plan for big-ticket purchases. In 2012, about 900,000 filers in Washington took advantage of the sales-tax deductions, lowering their tax bill by an average of $602. Washington residents paid a combined average of 8.86 percent in local and state sales taxes in 2013, fourth highest in the nation, according to the Tax Foundation.
“It is time to permanently correct this inequity in the tax code and provide certainty for Washington taxpayers,” Cantwell said in a statement. “Taxpayers shouldn’t have to guess every year whether they will be able to claim this deduction. This is a matter of tax fairness for 11 million taxpayers nationwide — and it’s time for Congress to act.”
Prospects for the bill’s passage, however, may be uncertain if it gets rolled into an overhaul of the tax code. New Senate Majority Leader Mitch McConnell and House Speaker John Boehner have said tax reform would be a priority for the 114th Congress. But their plan to lower both the corporate and individual tax rates could force the elimination or reductions for a host of tax breaks, including for mortgage interest and charitable contributions.
The sales-tax deduction is estimated to cost the U.S. Treasury $3.1 billion in revenue over
10 one year s and $35 billion over 10 years.