April 8 Daily News editorial

Washington’s congressional delegation, led by Democratic Rep. Brian Baird, battled for more than a decade to restore the state sales tax deduction, which had been stripped from the federal tax code in 1986. That goal was achieved in 2004, but only on a temporary basis. The deduction has been extended three times, but it is due to expire at the end of the 2009 tax year.

Watching Congress debate the fate of this tax break every year or two — with the debate sometimes dragging on until final days of the session — has been frustrating. But the current debate could be the last, at least for the foreseeable future. Last week, the Senate approved an amendment to the fiscal 2010 budget bill that would make the state sales tax deduction a permanent feature of the federal tax code. A similar measure introduced by Baird on the first day of 111th Congress is pending in the House Ways and Means Committee. Baird’s office reports that it currently has more than 50 co-sponsors.

This effort to make sales tax deductibility was helped by the elevation of Nevada Democrat Harry Reid to Senate majority leader in 2006, no doubt. Nevada is among those relatively few states that have a sales tax, but no state income tax. The others, in addition to Washington, are Wyoming, South Dakota, Florida, Texas and Tennessee. Reid authored the Senate’s sales tax deductibility provision.

Reid’s amendment would create a deficit-neutral reserve fund to offset the cost to the U.S. Treasury in 2010 and beyond, according to Maria Recio of McClatchy Newspapers. But this measure cannot be viewed as a costly, new revenue drain — not when it’s been part of the federal tax code since 2004.

Knowing that the sales tax deduction isn’t going to disappear anytime soon would offer some comfort to Washington taxpayers. They and the state economy have a considerable stake in this tax break.

Last year, upwards of 800,000 Washingtonians who itemized their federal tax deductions saved, on average, $500 by claiming the state sales tax they paid. The Economic and Revenue Forecast Council estimates that the deduction brings from 2,000 to 3,000 jobs to Washington and each dollar retained in the state through the deduction results in about 50 cents in economic stimulus. Conversely, the Congressional Research Service reports that allowing this tax deduction to expire could cost the state from $488 million to $541 million annually.

It’s not just a matter of dollars-and-cents. There’s the issue of fairness. As Baird noted last week in a press release, “It’s simply unfair that a person in Vancouver would pay more in federal income tax than a person who makes the same amount of money each year, but lives across the river in Portland.” Yet, that is what the loss of this deduction would mean. Unlike their neighbors in Oregon, who have the state income tax deduction, Washington citizens would get no break for the state taxes they pay.

Sales tax deductibility shouldn’t be subject to elimination every year or two. It’s time Congress made this deduction permanent.