The Republican tax bill introduced Thursday would eliminate a sales tax deduction popular with Washington taxpayers and one that most of the state's delegation has fought to make permanent.
The Republican tax bill introduced in Congress Thursday would end a state sales tax deduction taken by many thousands of Washington taxpayers on their federal returns.
Democrats from the state’s congressional delegation broadly objected to the proposal, including ending the sales tax deduction, while some Republicans said other deductions and tax credits would off-set the loss of the sales-tax write-off.
“This giveaway to the wealthy will hurt millions of Washington state families, and specifically, the Republican elimination of the sales tax deduction will mean billions of dollars will be lost from the pockets of Washington state workers in order to line the pockets of billionaires and big corporations,” U.S. Sen. Patty Murray, D-Wash., said in a statement.
Rep. Cathy McMorris Rodgers, R-Spokane, called the tax proposal “must-pass legislation” that will benefit middle-class families. Her spokesman, Jared Powell, said deductions and loopholes need to be eliminated to create a fair and simple tax code.
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“Our plan introduced today lowers tax rates for low and middle income Washingtonians. With the doubling of the standard deduction, the increase of the Child Tax Credit, and other tax relief, people will see a lowering of their tax burden despite the elimination of many deductions,” Powell said. “What’s more, Washingtonians will still be able to deduct up to $10,000 of their state property taxes under our plan.”
The bill would eliminate the deduction of most state and local taxes on federal returns, including sales and income taxes.
Sen. Maria Cantwell, D-Wash., and Murray have been working for years to make the sales-tax deduction permanent. The deduction was repealed in 1986, and Cantwell and some members of the state’s delegation were able to temporarily reinstate it in 2004.
The deduction was made permanent in 2015. Washington and seven other states — Alaska, Nevada, Wyoming, South Dakota, Texas, Tennessee and Florida — don’t have a state income tax.
“By eliminating deductions like the state and local sales tax deduction and gutting the home mortgage deduction, the Republican tax plan would raise taxes on middle class Washington families and make it harder to buy or own a home,” Cantwell said in a statement. “Studies have shown that 80 percent of the benefits of the Republican tax plan would go to the richest of the rich.”
Rep. Jaime Herrera Beutler, R-Vancouver, has supported the sales tax deduction but wants to better understand how other changes in the bill will impact taxpayers in her district, said her spokeswoman Angeline Riesterer.
“Jaime has begun to review the detailed tax reform proposal released today to understand its overall impact on Southwest Washington residents,” Riesterer said. “Under the current tax code, she helped lead the way in making the sales tax deduction permanent, but it’s very possible that the sum of all parts in the new tax system will ease the burden on hardworking taxpayers. That will be the standard for earning Jaime’s support.”
Rep. Dave Reichert, R-Auburn, a member of the House Ways and Means Committee that will begin considering the legislation Monday, called it “a once in a generation opportunity to revamp the tax code and increase paychecks for middle class families.”
Gov. Jay Inslee and county commissioners of both parties from Kittitas, Wahkiakum, Lincoln and Snohomish counties sent a letter last month to the state’s congressional delegation urging them to oppose the elimination of the sales tax deduction.
They said they understand lawmakers wanting to reform the tax system, but “we ask you to understand that repealing the SALT (state and local tax) deduction would actually result in a significant federal tax increase on millions of Americans, the vast majority of whom are in the middle class,” the letter says.
The letter says that 30 percent of Washington tax filers claimed the state and local tax deductions in 2015, averaging about $7,400 a piece for a total of $7 billion statewide. Sales tax deductions made up $2 billion of the $7 billion.