Sales Tax Increase Would Be Offset on Federal Return

There’s growing discussion about a state sales tax increase to pay for essential health care investments. Being April 15th, I wanted to point out that for some Washingtonians, an increase in the state sales tax will be partially offset when they file their federal tax return if Congress makes the sales tax deduction permanent. The size of that deduction will rise if voters approve an increase in the state sales tax rate.

Of course, that only helps people who itemize their deductions (mostly homeowners and higher income households). This emphasizes the importance of including funding for the Working Families Tax Rebate (WFTR) in any tax increase proposal. The WFTR will refund a portion of the state sales tax to lower income working families (more info here).

Speaking of the WFTR, it's also timely to mention that one of the advantages of the idea is that it piggybacks on the federal tax return process. That means that the IRS will be doing a significant share of the administration. It also means that the application process will be simple and straightforward. More on that here.