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Cantwell Pushes Extension of State Sales Tax Deduction, R&D Tax Credit, College Tuition Deduction

Location: Washington, DC

Cantwell Pushes Extension of State Sales Tax Deduction, R&D Tax Credit, College Tuition Deduction

Republican Leadership Twice Blocks Proposal by Cantwell and Others to Deliver Important Tax Relief to Working Americans and Restore Tax Fairness to Washingtonians

Thursday, September 14,2006

WASHINGTON, DC - Thursday, U.S. Senator Maria Cantwell (D-WA) denounced the Senate Republican leadership's refusal to approve a measure offered by Senators Max Baucus (D-MT), Cantwell, and others to extend the state sales tax deduction, the research and development tax credit, a tax deduction for college tuition, and other bipartisan tax relief provisions for America's families, including those employed in the Northwest timber industry. The legislation was blocked by the Republican leadership late Wednesday night when Senator Bill Frist (R-TN) objected to a request by Baucus that the Senate pass the proposal. Republican leadership again objected to a separate request by Baucus on Thursday that the proposal be passed. Cantwell vowed to continue pushing to get these important tax provisions that benefit Washington's working families signed into law. The IRS has said it needs tax changes by October 15 for them to go into effect for the 2006 tax year.

"An overwhelming majority of the Senate is on the record in favor of these measures and they should be passed without delay on their own merits, not tangled up in other controversial legislation that threatens their passage," said Cantwell. "That's the way the Senate ought to do business. We should have taken up this proposal last night or again this morning and gotten the job done."

"The state sales tax deduction is a simple matter of tax fairness," continued Cantwell. "It puts hard-earned cash back into the wallets of working Washingtonians and boosts job growth for our state. With tax credits for R&D and families struggling to put their children through college, our proposal would have maintained our high-skilled workforce, added jobs, and kept our economy strong."

Senate Republican leaders have thus far insisted on tying these bipartisan tax measures to controversial legislation to repeal the estate tax for multi-millionaires and a minimum wage proposal that non-partisan, independent experts said would have cut the salaries of Washington state's tip workers. In July, Cantwell voted against the so-called ‘Trifecta' measure, which even the bill's authors have acknowledged has little chance of passing.

Without an extension of the sales tax deduction that Cantwell helped put in place, Washingtonians will be unable to deduct the sales taxes they pay on their 2006 federal income tax returns. In 2004, Cantwell worked with a bipartisan group of senators and representatives to get this deduction signed into law, and has fought continuously since then to extend the deduction and make it permanent as the sponsor of legislation to make the deduction permanent.

In most states, taxpayers can deduct state income taxes from their total income taxed by the federal government. However, from 1986 until 2004 when Cantwell helped get a deduction in place, residents of states with a higher sales tax in place of state income taxes went without a deduction for sales taxes. In 2004, the tax cut saved Washingtonians over $500 million, with almost 850,000 taxpayers taking advantage of the deduction. Without the deduction, Washingtonians are taxed twice—once when they make a purchase and again when they file their taxes.

The Cantwell-backed legislation would also have extended the research and development tax credit for two years to help boost the development of cutting-edge advancements that can create jobs and help our economy grow. In addition, it would have extended for two years the above-the-line deduction of up to $4,000 for qualified college tuition and other college-related expenses. This deduction for college costs was used by 95,236 Washingtonians in 2003 and by more than 3,600,000 people across the country.

The proposal also contained a Cantwell-backed deduction for qualified timber gains. Other provisions included in the legislation would have extended the deduction for qualified community development entities that serve low-income communities, the welfare-to-work deduction, and the deduction for teachers who use their own money to buy supplies for their classrooms. In 2003, 62,849 Washingtonians and more than 3 million individuals nationwide took advantage of the deduction.

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