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Rep. McDermott Works to Extend Tax Deduction that Benefits Washington Residents Introduces Bi-Partisan Legislation in the House
September 27, 2007
For Immediate Release

Rep. Jim McDermott (D-WA) introduced legislation today that would extend the state and local sales tax deduction that benefits Washington residents and residents of eight other states when they prepare their federal income taxes.  The deduction saves taxpayers in the affected states over $2 billion a year.

McDermott, 4th highest ranking Democrat on the House Ways and Means Committee, which has jurisdiction over the U.S. tax code, introduced H.R. 3680 and the bill was co-sponsored by Rep. Kevin Brady (R-TX), a Republican Member of the Ways and Means Committee.  Several other Members of the Ways and Means Committee- Reps. John Tanner (D-NJ), Shelley Berkley (D-NV), Kendrick B. Meek (D-FL), Sam Johnson (R-TX), John S. Tanner (D-TN), and Jon Porter (R-NV) immediately signed on to the bill.

Under the existing tax code, Americans can deduct what they pay in state income taxes on their federal tax returns, but that penalizes residents of states including Washington that derive their revenue from state and local sales taxes. 

“Whether it is called a state income tax or a state sales tax, the net effect is the same, citizens paying their share to support state and local services, and they deserve to deduct their fair share from federal taxes,” McDermott said.  “Washington state residents should not be punished because state revenue comes from sales taxes, not state income taxes.”

The sales tax deduction is set to expire at the end of this year.  McDermott’s bill would extend the deduction for another year.  “The only fair thing to do is to make the deduction permanent,” McDermott said, “and that’s where I intend to go when the Ways and Means Committee considers overall tax reform and fairness in the federal tax code.”

Under McDermott’s bill, residents either can take a deduction based on the amount the IRS estimates they paid based on local tax rates, or they can deduct the total amount of sales taxes paid by accumulating receipts showing the taxes paid.

The nine states that do not have a state income tax and would directly benefit from the McDermott legislation are: Washington, Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee and Wyoming.