State sales-tax exemption ensnared in Senate race

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

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

The issue always has been an end-of-the-session item with sharp disagreements, particularly over how to pay for it. But it has escalated into the latest flash point in an 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.

After Democrats blocked a Republican effort to pass a permanent extension Monday night, Rossi, who also supports extending the deduction, 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."

Unless Congress acts, the state's taxpayers won't be able to use the sales-tax deduction on their 2010 tax return, due April 15. Congress will return for a lame-duck session after November elections.

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

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

Baird said the deduction has saved Washington state taxpayers $350 million to $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.

Other states that have benefited are Texas, Florida, Nevada, South Dakota, Tennessee and Wyoming.

The deduction issue erupted on the Senate floor last week, when Murray asked for unanimous consent to approve the 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. While 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 extended the sales-tax deduction permanently. But the bill didn't include a way to pay for it, and Baucus objected.

Murray wasn't ready to give up.

The senator persuaded Democrats to accept the Barrasso bill, 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. She argued that the measure was the same as the Barrasso bill, except Murray's version 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, expected to campaign for Rossi in Washington state in coming weeks, then wanted to substitute Republican language for the sales-tax deduction and another deduction and pay for them with spending cuts.

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

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

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

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