YEAR after year, Washington state taxpayers are forced to play Congress’ aggravating game of fantasy role-playing. Alas, there are no elixirs or elves, although there are a few ogres.
In this game, Congress pretends it will magically transform into a body capable of passing a comprehensive tax bill. Such a bill would almost assuredly include a permanent federal income-tax deduction for state and local sales taxes, on par with the existing permanent deduction for state income taxes. This matters because some states, such as Washington, have the former, but not the latter.
Instead, every year since 2004, Congress has passed a temporary extension of the sales-tax deduction. Next year, fantastical thinking goes, will be the big fix for the tax code.
Washington’s delegation, led for years by U.S. Sen. Maria Cantwell, has tried to pop this absurdity. So too this year, with Rep. Doc Hastings, R-Pasco, hammering away. President Obama is on board, recommending a permanent sales-tax deduction. But the U.S. House left town on Friday for the year without so much as another temporary extension, effectively ending the deduction beginning in 2014.
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This is big money for Washington state. An analysis by the Pew Charitable Trusts released this week shows Washington is the state most dependent on the sales-tax deduction, with 29 percent of filers in the Evergreen State claiming it. The top seven states all have limited or no state income taxes. Filers who claim the deduction typically save about $500 off their tax bill.
The fantasy game will likely resume on Jan. 6: Congress could pass a retroactive exemption, allowing deductions for the full 2014 calendar year. They could even pretend it had never expired, and, with a sprinkle of pixie dust, wipe clean the memory that the 113th U.S. Congress was the least productive in the history of the country, passing just 56 bills as of Friday.
Congress should end this game. Pass a permanent sales-tax deduction.