Congress passes key tax bill, will allow Washingtonians to deduct state sales tax on April’s tax filings
Bill also extends key tax credits for hiring veterans, producing clean energy and building low-income housing
WASHINGTON, D.C. – Today, Senator Maria Cantwell (D-WA) applauded U.S. Senate passage of a tax bill that will enable Washingtonians to claim the state and local sales tax deduction on their 2014 federal income taxes. The bill, the Tax Increase Prevention Act of 2014, also includes other critical Cantwell priorities including tax credits for hiring veterans, building low-income housing and producing clean energy.
The tax bill passed the Senate by a margin of 76 to 16. It has already passed the U.S. House of Representatives and now goes to President Obama’s desk for signature. Washington is among eight states that don’t have an income tax and, therefore, taxpayers can’t claim an income tax deduction on their federal returns. Congress let the sales tax deduction expire at the end of 2013, which left its future in doubt.
Cantwell, a member of the Senate Finance Committee, helped to craft the Senate package of tax extenders, which passed the Committee in April. She fought for the sales tax deduction’s inclusion in the bill.
“Tonight, we can say that Washingtonians can take the sales receipts they have this year and make sure they are deducted from their tax obligations for 2014,” Cantwell said in a Senate floor speech tonight. “I hope we’ll be here someday when we can get permanent tax fairness into the code. That means a permanent provision so we don’t have to come back here every year and get the tax fairness our states deserve. Let’s make sure we take these provisions that are so important for our economy to move forward to give the taxpayers predictability and certainty.”
Video of Senator Cantwell’s floor speech is available here.
Since 2004, Cantwell has led bipartisan efforts to ensure the sales tax deduction remains in effect and to provide tax fairness for taxpayers in Washington state and other states that don’t have an income tax, and therefore, can’t claim a state income tax deduction. Cantwell has repeatedly introduced legislation to make the deduction permanent, including an amendment earlier in 2014 in the Senate Finance Committee. Cantwell fought to get a two-year extension of the sales tax deduction in the deal that Congress reached Jan. 1, 2013, to avert the fiscal cliff.
About 900,000 Washington state taxpayers took advantage of the state sales tax deduction in 2012, reducing their taxable income by $1.9 billion, according to IRS data. Washington state taxpayers saved an average of $602 with the state sales tax deduction in 2012, according to a Pew Charitable Trusts report. Washington is among eight states, including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming, in which taxpayers don’t pay a state income tax, and therefore, can’t claim an income tax deduction on their tax returns.
“The state and local sales tax deduction promotes economic growth across Washington,” said Lori Mattson, President & CEO of the Tri-City Regional Chamber of Commerce. “The deduction ensures hundreds of millions of dollars stay in our state and are spent locally. As the fastest-growing community in Washington, this has a huge impact on local jobs and businesses in the Tri-Cities.”
“Continuing the deduction for state sales taxes paid will enable more dollars to be retained by taxpayers and circulated back into our local economy resulting in a positive economic stimulus,” said Chuck Zimmerman, President of the Board of Directors, Wenatchee Valley Chamber of Commerce.
“This keeps us on equal footing with those in other states who can deduct an income tax, but it also benefits Washington businesses by removing what would otherwise be a financial incentive to customers to shop across state lines,” said Verlynn Best, President and CEO of the Greater Yakima Chamber of Commerce.
“In Walla Walla, this means that our residents will have more disposable income to spend at the small businesses that employ the vast majority of our friends and neighbors, and that make our town the community that it is,” said David Woolson, President and CEO of the Walla Walla Valley Chamber of Commerce. “For this reason, the Walla Walla Valley Chamber of Commerce appreciates all of the hard work that our Congressional delegation is putting in to ensure that the state and local tax deduction is extended and/or made permanent.”
The legislation includes several other tax provisions championed by Senator Cantwell that are critical to Washington state, including:
- Veterans’ Work Opportunity Tax Credit: The legislation includes a one-year extension of a tax incentive that helped Washington state employers hire 16,000 veterans since October 2012. It encourages businesses to hire returning veterans through a tax credit of up to $9,600.
Low Income Housing Tax Credit: This provision is designed to get more affordable housing built in hard-to-serve areas and challenging areas due to high costs. Since the program was created in 1986, it has helped finance more than 2.4 million affordable apartments nationwide, including more than 56,000 in Washington, and has supported 95,000 jobs annually – many of which are in the small business sector.
“The economy in this state benefits highly from low-income tax credits, both for the housing units that have been built and the jobs that have been created in their construction,” said Karen Miller, Chairwoman of the Washington State Housing and Finance Commission.
- New Markets Tax Credit: This provision encourages investment in economically challenged areas. Cantwell is a long-time supporter of the New Markets Tax Credit, which has supported thousands of jobs in Washington state and more than 350,000 jobs across the nation. In Washington state, between 2003 and 2010, $650 million in NMTC investments leveraged more than $1.2 billion in total project investments and helped create nearly 6,000 full-time jobs and 8,000 construction jobs.
“New Markets Tax Credits are a valuable tool we use to attract companies bringing family-wage jobs to our lower-income communities,” said Todd Coleman, Executive Director of the Port of Vancouver. “A great example is Farwest Steel, a company that, with the help of new markets tax credits, built a facility at the Port of Vancouver in 2010 and now employs more than 250 people.”
- Energy production: The legislation extends for one year a tax incentive to encourage production of wind and solar energy. Earlier this year, Cantwell introduced a bipartisan amendment with Sen. Chuck Grassley (R-IA) to extend the wind production tax credit for another two years.
“Wind Energy development has had a dramatic impact on our rural community. It has almost tripled our tax base, created new living wage jobs, brought new revenue to farmers, and expanded economic activity throughout the region,” said Jennie Dickinson, Manager, Port of Columbia in Columbia County. “After decades of suffering from declines in employment and population, this industry has breathed new life into our community.”
“Without the tax credit, wind energy development in Klickitat County and across Washington state would not be viable,” said the Klickitat County Board of Commissioners.
- Biodiesel tax credit: The bill will extend the $1-per-gallon tax credit for biodiesel producers. Industry growth slowed after Congress let the credit expire in 2012 and production remained flat at just under 1.1 billion gallons – the same level as 2011. When the credit was reinstated in 2013, the U.S. biodiesel industry produced 1.8 billion gallons in that year. Cantwell and Grassley introduced separate legislation earlier this year to renew the credit.
- Commuter Tax Benefit: Commuters will be allowed retroactively to take advantage of a pre-tax benefit of $245 per month for public transit use in 2014. The transit benefit dropped to $130 per month on January 1, affecting about 1,600 employers in King County. Cantwell has called for parity for transit users and the legislation passed today reinstates the previous benefit so transit commuters continue getting the same amount drivers receive to cover parking costs.
- Research and Development: The legislation extends for businesses a 20 percent credit for research spending that exceeds predicted R&D costs for that year. Since its enactment in mid-1981, the credit has been extended 15 times and significantly modified five times. In addition, Cantwell cosponsored a bipartisan amendment that enables small startups to use the credit and increase domestic innovation.
“As the State’s Land Grant institution, our researchers work hard to meet the needs of our industry partners and the R&D Tax credit promotes that collaboration,” said Mel Netzhammer, Chancellor of Washington State University Vancouver.
“Increasing the research capacity in Clark County is a key component of developing new industry clusters and assisting existing clusters grow,” said Mike Bomar, President of the Columbia River Economic Development Council. “Programs that support this endeavor, such as the R&D tax credit, help incentivize this important piece of our long-term economic development strategy for the region.”