Losing Your NJ Income Tax Break In Trump Plan Could Hurt More Than Property Tax Shift
WASHINGTON -- The truncated property tax break included in Republican tax reform legislation would be of little benefit to most New Jerseyans, who deduct far more in state and local income or sales taxes, according to a study released as congressional Republicans begin writing their final bill.
The income and sales tax deduction accounted for a majority of the state and local tax break enjoyed by taxpayers in two thirds of the state's congressional districts, according to the study by the Center on Budget and Policy Priorities, a progressive research group in Washington.
Republican legislation backed by President Donald Trump would cap the property tax deduction at $10,000 and eliminate the break altogether for state and local income and sales taxes.
U.S. voters disapproved of the tax bill by 53 percent to 29 percent, according to a Quinnipiac University poll released Tuesday.
The state and local tax deduction is especially important to New Jersey and other high-tax states that send billions of dollars more to Washington than they receive in services.
"Too many Republicans from New York and New Jersey sold our region out when they voted for the House bill," said Rep. Bill Pascrell Jr., D-9th Dist., a member of the tax-writing House Ways and Means Committee. "We need to unite as a region to kill this tax hike bill, which redistributes resources from hard-working people of the tristate area to the rest of the country."
Despite New Jersey having the nation's highest property taxes, the break for income or sales taxes accounts for a majority of the state and local tax deduction in eight of New Jersey's 12 congressional districts.
While the Republican tax bills almost double the standard deduction for couples to $24,000, that increase is more than offset for a family of three because the legislation also ends the exemption of $4,050 per person.
And the number of New Jersey residents now deducting their state and local taxes would decline by 60 percent, according to the progressive New Jersey Policy Perspective.
That's because they no longer would have enough in tax breaks to exceed the higher standard deduction, even with the $10,000 property tax deduction.
Primarily as a result of losing the state and local tax deduction, residents of New Jersey, New York, California and Maryland would see their taxes go up by $16.7 billion under the House bill, according to the progressive Institute on Taxation and Economic Policy. The other 46 states would get a tax cut.
"Tax reform should benefit all Americans and not pick winner states over loser states," said Rep. Leonard Lance, R-7th Dist. "New Jersey is already one of the highest-taxed states in the nation, sending a disproportionate amount of funds to Washington. Enough is enough."
Lance and Rep. Josh Gottheimer, D-5th Dist., gave House and Senate negotiators a proposal Tuesday that curbs other tax breaks that favor special interests and wealthy Americans, raising enough money to preserve the full state and local tax deduction.
"This plan delivers tax cuts and stops moocher states from gutting New Jersey's economy," Gottheimer said.
Despite claims by Trump and congressional Republicans that their tax plan favors the middle class, the richest 1 percent of taxpayers would get 47 percent of the benefits in the House bill and 62 percent in the Senate bill, according to the progressive Tax Policy Center.
Americans agree. Close to two-thirds of U.S. voters, 64 percent, said the tax plan would favor the rich, while just 24 percent said it would benefit the middle class and 5 percent said it would benefit low-income taxpayers.
Trump's tax plan is "considered built for the rich at the expense of the rest," said Tim Malloy, assistant director of the Quinnipiac poll.
The survey of 1,508 voters was conducted Nov. 29-Dec. 4 and had a margin of error of 3.1 percentage points.