Today, Gov. Jay Inslee and elected county leaders from across Washington sent a letter to the state’s congressional delegation urging them to oppose repeal of the State & Local Tax (SALT) deduction that reduces federal taxes for over 1 million mostly middle-class Washington households. The Trump Administration and congressional leaders have proposed repealing the deduction as a part of federal tax reform.
“On behalf of the state of Washington and its 39 counties, we strongly urge you to oppose efforts to eliminate the federal tax deduction for payment of state and local taxes,” wrote Inslee and Kittitas County Commissioner Obie O'Brien, Wahkiakum County Commissioner Blair Brady, Lincoln County Commissioner Scott Hutsell, and Snohomish County Councilmember Stephanie Wright, who together serve as the leaders of the Washington State Association of Counties.
“If enacted, this would result in over 1 million Washingtonians – primarily middle class families – seeing their income tax burden increased by the federal government. Such a radical change in federal tax law would also place additional pressure on our governments to cut the important local services that over seven million Washingtonians rely upon.”
Read the full letter.
Background
The SALT deduction allows for Washingtonians to deduct their sales and property tax payments to state and local governments from their federal income tax liability. A 2014 study found that the deduction reduced the average Washington State claimant’s federal taxes by approximately $600 per year. In Washington and across the country, the vast majority of families who claim that SALT deduction are in the middle class; over 85 percent of Washington households who claim the deduction make less than $200,000 per year.
The SALT deduction has been available to American families ever since the federal government first implemented an income tax, in 1913. However, after Congress reformed the federal tax code in 1986 this deduction did not apply to payment of states sales tax, but could be used only in states with an income tax. Congress reinstituted the sales tax deduction on multiple temporary bases, and later made it permanent, in 2015, thanks to bipartisan advocacy from the Washington State Congressional Delegation.
In addition to increasing the federal taxes on middle-class families, repealing the SALT deduction would place pressure on state and local governments to reduce their own revenue collections that sustain local services, since their residents’ local tax payments would no longer receive preferential tax treatment from the federal government. This could affect schools, housing, health care, roads and infrastructure, public safety and emergency services, and more.
Inslee and Washington county leaders join state and local government officials from both parties and across the country, as well as education, housing and other stakeholders, in urging Congress to reject proposals to eliminate the SALT deduction. Last month a national bipartisan coalition including the National Governors Association (NGA) and National Association of Counties (NACo) wrote to Congress urging it to oppose this policy.