With Senator Maria Cantwell's backing today, the U.S. Senate Committee on Finance passed bipartisan legislation that would extend key tax credits she championed including deductions for state and local sales taxes and incentives to hire returning veterans and wounded warriors, build low-income housing, and produce clean energy.
The Family and Business Tax Cut Certainty Act passed the U.S. Senate Committee on Finance by a 19-5 vote. Cantwell has long fought for extending these expiring tax incentives, and as a member of the Finance Committee she played a key role in pushing for including the sales tax deduction in the larger tax extenders package. The package now heads to the full Senate for a vote.
The bill would provide a two-year extension of the state and local sales tax deduction that 850,000 Washingtonians claim for an average tax savings of nearly $500 per filer.
"Today's effort on tax reform is really a bipartisan effort," said Cantwell during the hearing. "Of particular importance to me and to many Washingtonians is the state and local sales tax deduction. Extending and making this deduction permanent is, in my belief, a matter of fairness. If you come from a state that doesn't have an income tax, being able to deduct your sales tax from your federal income tax obligations is a matter of fairness."
Video of today's Finance hearing available here.
Under the agreement, the state and local sales tax deduction would be extended for two years, covering calendar years 2012 and 2013. Without an extension, Washington residents would no longer be able to claim the deduction when they file taxes this April. For 2009, the most recent year of published IRS data, nearly 850,000 Washingtonians took advantage of the state and local sales tax deduction and reduced their taxable income by more than $1.8 billion.
Cantwell has been a national leader on efforts to secure an extension. In March, Cantwell and Senator Marco Rubio (R-FL) introduced an amendment to extend the state and local sales tax deduction for one year. The itemized deduction allows taxpayers in states without an income tax to deduct the sales taxes they pay from their federal income tax returns.
On February 2nd, she also sent a letter with 14 other Senators to Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell, Senate Finance Committee Chairman Max Baucus, and Senate Finance Committee Ranking Member Orrin Hatch calling for an extension of the state and local sales tax deduction as part of a tax extenders package. Cantwell also secured an extension of the sales tax deduction in December 2010 -- which expired at the end of 2011.
Taxpayers in Alaska, Florida, Nevada, Tennessee, Texas, South Dakota, and Wyoming in addition to Washington benefit from the sales tax deduction. In 2009, the most recent year for which official data is available, taxpayers deducted less than $16 billion in state and local sales taxes, a small fraction compared to the $236 billion in state and local income taxes deducted on federal returns. But for taxpayers in these eight states, this deduction helps reduce their taxable incomes by nearly $16 billion dollars a year.
The legislation includes the extension of other important Cantwell-backed provisions that have supported job and economic growth in Washington state.
"Many people on this committee know that I have continued to voice my interest in having this tax extender package done as a way to produce predictability and certainty for taxpayers," said Cantwell during the hearing. "I also want to say the Clean Energy Production Tax Credit, the New Markets Tax Credit, the Biodiesel Tax Credit, the R&D Tax Credit are all, in my belief, real job creators and leverage public sector dollars into much more huge private sector investment."
Those provisions include:
Returning Heroes and Wounded Warriors Work Opportunity Tax Credits -- These credits have allowed businesses to obtain a tax credit when they hire qualified veterans to fill openings. The agreement would extend this opportunity for one year through 2013.
Clean Energy Tax Credits -- A Cantwell-brokered bipartisan deal reforming and extending expiring clean energy production tax credits will effectively provide a multiyear boost for technologies as diverse as hydropower, biomass, geothermal, ocean, and wind energy. The clean energy credits also included other Cantwell priorities such as incentives for the purchase of energy efficient appliances and homes, and a two year extension of the biodiesel tax credit, which also covers biojet fuel. The 2010 lapse of the biodiesel tax credit resulted in a 42 percent drop in production that year, which led to the loss of nearly 8,900 jobs.
Research and Development Tax Credits -- Under the agreement Research and Development Tax Credits would be extended for two years. This would ensure that businesses can continue to receive credits as they pursue key research breakthroughs that could benefit the larger economy.
New Markets Tax Credit -- The New Markets Tax Credit (NMTC) would be extended for two years, under the agreement. The NMTC has been used to invest in key projects that support job growth, leveraging $8 of private investment for every dollar of public funding. Cantwell has urged Senate Finance Committee Chairman Max Baucus to extend the NMTC's because of its job benefits in Washington state and around the country. Last year she visited Seattle Children's Hospital, where NMTC helped create 50 jobs, and the Port of Vancouver where the credit helped Farwest Steel bring 200 jobs to the area.
Cantwell mentioned the potential growth that could come from extending the Wind Production Tax Credit (PTC) too, which will support tens of thousands of new jobs and tens of billions of dollars of private sector investment in clean energy projects nationwide.
"Just the fact that the PTC could be changed to a commence construction rather than a place in service, I believe, will provide much leveraged job creation over the next year," said Cantwell during the hearing. "So, again I thank the Chairman and the Ranking Member for their perseverance in coming up with what I think is a real victory."
During the hearing, Cantwell offered an amendment with Senator Olympia Snowe (R-ME) to include the successful Low Income Housing Tax Credit that was approved as part of the larger package. It is estimated that for every 100 housing units built with the credit, 116 jobs are created. The credit also generates $14 to $15 billion dollars worth of economic development every year.
"This would allow needed time for the projects to secure the necessary financing from start to construction," said Cantwell at today's hearing. "This tax credit is a policy tool that we think effectively promotes job creation and affordable places for millions of Americans This is very timely and appropriate if we want to see continued housing creation in 2013."
The Low-Income Housing Tax Credit helps to finance 90 percent of affordable housing projects in the United States. Since the program was created in 1986, it has helped finance more than 2.4 million affordable apartments nationwide, including nearly 52,000 in Washington, and has created 95,000 jobs annually -- many of which are in the small business sector. Last August Cantwell participated in a Tacoma forum on continuing the development of affordable housing in Washington state.