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We now know why U.S. Speaker of the House Paul Ryan is growing a beard - he is getting in the spirit of Santa Claus for Washington state taxpayers. Last night Ryan announced that Congress had come to a deal on major tax legislation. Included in the agreement is an issue long on Washington state taxpayers' Christmas list - making permanent the deduction for state sales taxes.
Since major federal tax reform was enacted in 1986, the deductibility of state sales taxes has been in question. While taxpayers in states with income taxes knew they would be able to claim a deduction for state income taxes on their federal taxes, the same was not true for the non-income tax states. Recently Congress has been authorizing temporary one-year extensions for deducting state sales taxes but temporary tax policy provides uncertainty for taxpayers.
As reported by USA Today:
How can families and local businesses count on tax relief each year as long as Congress can't decide what's permanent and what's not?’’ said Rep. Kevin Brady of Texas, chairman of the Ways and Means Committee. “That confusion ends now, and our economy will be stronger for it. By delivering permanent tax relief, we’re making it easier for Americans to keep more of their own money, find new jobs, and increase their wages.’
Should Congress approve and the President sign the latest tax agreement the federal government will no longer threaten to treat states with the wisdom to not tax income differently. This development may also encourage more states to move away from income taxes since their taxpayers will no longer be under threat of tax relief discrimination at the federal level.
Though it may not be a membership to the Jelly of the Month Club, Congress making the state sales tax deduction permanent is a Christmas gift that will keep on giving Washingtonians tax relief throughout the entire year.
