WASHINGTON – The far-reaching tax measure passed by the House of Representatives on Tuesday does not contain a provision dearly important to Washington residents — allowing people here and in six other states without state income taxes to deduct sales taxes on their federal tax returns.
But don’t despair: The now-familiar scramble to renew the sales-tax deduction isn’t yet over.
President Barack Obama has threatened to veto the legislation that passed Tuesday, in part because House Republicans stuck in language to force the White House to move up a decision on approving the Keystone XL oil pipeline from Canada to Texas.
Among other things, the bill would renew for one more year the temporary cut on Social Security taxes and extend unemployment benefits for the long-term jobless.
But the bill excluded several other usual “tax extenders,” including the sales-tax deduction, that had been getting renewed in piecemeal fashion.
The House voted 234-193 for the bill. All four Republicans members from Washington state supported it: Reps. Dave Reichert, Doc Hastings, Cathy McMorris Rodgers and Jaime Herrera Beutler. All five Democrats from the state’s delegation voted no: Reps. Jim McDermott, Norm Dicks, Adam Smith, Rick Larsen and Jay Inslee.
In the Senate, Republicans have twice already blocked Democrats’ efforts to reduce the payroll tax even further, to 3.1 percent.
All that means the fate of the sales-tax deduction beyond Dec. 31 remains unsettled.
Since 2004, Congress has allowed filers from Washington and six other states – Alaska, Texas, Wyoming, Florida, Tennessee and Nevada – to offset their federal taxable income with local and state sales taxes paid.
The provision, despite efforts by such members as Reichert and others, has never been written into the tax code. To keep it going, Congress has had to renew it in 2006, 2008 and 2010.
McDermott, a senior Democrat on the tax-writing House Ways and Means Committee, has been pushing to renew the deduction.
In 2009, nearly 850,000 tax returns from Washington claimed sales tax deductions worth $1.81 billion, said David Tucker, a spokesman for the Internal Revenue Service in Seattle.
That works out to an average deduction of $2,100 per return.
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