Politics & Government

Tax break extension falls victim to election-year politics

WASHINGTON — A tax break that has saved Washington residents up to $500 million annually is once again caught up in Congress' rush to adjourn, but this year the maneuvering has become entangled in election-year politics and the race between Democratic Sen. Patty Murray and Republican challenger Dino Rossi.

Over the past week, Republicans and Democrats on the Senate floor have both blocked efforts to extend the break, which allows residents of Washington and six other states without an income tax to deduct the amount they paid in state sales tax on their federal returns.

The issue has always been an end of the session item with sharp disagreements particularly over how to pay for it. But it has escalated into the latest flashpoint in the already contentious Senate race.

"I am going to keep fighting to get this done, but I am deeply disappointed that Senate Republicans continue to treat this as an election year game when families across my home state of Washington are counting on us to get something done," Murray said after Republicans blocked her push Wednesday night to pass a one-year extension.

On Monday night, after Democrats blocked a Republican effort to pass a permanent extension, Rossi said, "Instead of finishing the work the people of Washington state elected her to do, Senator Murray opted instead to put politics first and gamble with the jobs and paychecks of every Washingtonian."

The sales tax deduction expired at the end of last year. Unless Congress acts, the state's taxpayers won't be able to use it on their 2010 taxes. Congress will return for a lame-duck session after the November election.

But, there are no guarantees, said Rep. Brian Baird, D-Wash., who is not seeking re-election but has been instrumental in the House over the years in renewing the sales tax deduction.

"Sometimes brinksmanship can take you over the brink," Baird said, adding that he would find it "reprehensible" if either side was holding the measure hostage to advance their candidates at the expense of middle-class taxpayers.

In addition to Washington, other states with only sales taxes are Texas, Florida, Nevada, South Dakota, Tennessee and Wyoming.

Baird said the deduction has saved Washington state taxpayers between $350 million and $500 million annually. Others have said nearly 900,000 taxpayers in the state apply for the deduction annually, with each of them saving an average of $600 or more on their federal returns.

The deduction issue erupted on the Senate floor a week ago, when Murray asked for unanimous consent to approve the sales tax deduction as part of a larger package of tax extensions. The broader bill was written by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.

Baucus' bill paid for the tax extensions by increasing some taxes. Though Republicans support most of the extensions, they oppose raising taxes to pay for them and instead want spending cuts.

Sen. John Thune, R-S.D., objected to Murray's unanimous consent request.

On Monday, it was the Republicans' turn.

Sen. John Barrasso, R-Wyo., asked unanimous consent for passage of a measure originally introduced by Sen. Kay Bailey Hutchison, R-Texas, that would have permanently extended the sales tax deduction. But the bill didn't include a way to pay for it and Baucus objected.

Murray wasn't about give up.

The senator convinced Democrats to accept the Barrasso bill, but with one modification: Rather than extending the sales tax deduction permanently, the measure would have extended it for one year.

On Wednesday night, after the Senate had voted to adjourn but before the final gavel, Murray asked the Senate for unanimous consent to approve the one-year extension.

Murray argued it was exactly the same as the Barrasso bill, except it called for only a one-year extension.

"Frankly, this issue shouldn't be controversial and the livelihoods of middle-class families shouldn't be used as a political football in election year games," Murray said in a floor speech.

Thune, who is expected to campaign for Rossi in Washington state in the coming weeks, then wanted to substitute Republican language for the sales tax deduction and another tax deduction and pay for them with spending cuts.

Democratic Whip Richard Durbin of Illinois objected to Thune's language and then Thune objected to the Murray bill.

Murray asked Thune to reconsider and Thune said he would take a look at it and run it by his colleagues.

Rossi's campaign said Murray was offering a bill no one had seen, no one had read and was doing it after the Senate had voted to adjourn.

Murray's campaign said her bill was 73 words, the Senate had voted to adjourn but didn't adjourn for three more hours and during that time 23 other bills and resolutions were approved by unanimous consent.