Today, fighting back against the recently passed Tax Hike Bill, Congressman Josh Gottheimer and Governor-elect Phil Murphy joined together to offer a new Tax Cut Plan for New Jersey. They were joined by Congressman Bill Pascrell and the mayors of Fair Lawn, Paramus and Park Ridge who all expressed support for the plan and their eagerness to implement it, with state support, in their communities. The Tax Hike Bill took a two-by-four to the State of New Jersey, gutting the State and Local Deduction (SALT), sharply limiting New Jersey’s property tax deductions, and imposing a massive Tax Hike on Jersey families and businesses. The Tax Hike Bill was largely paid for on the backs of New Jersey taxpayers and, according to experts, will bring property values down by as much as twenty percent and send businesses and jobs to other states.
Today’s Tax Cut Plan restores the value of the State and Local Tax (SALT) Deduction by providing a tax deduction for taxpayers who make charitable contributions to their state or other local governments. States and local governments can establish or support funds that pay for local services, including schools, law enforcement, and infrastructure. Taxpayers can make voluntary contributions to these funds, for which they will receive an offsetting tax credit. The contributions will be deductible for federal tax purposes under existing law, even for those who pay the alternative minimum tax. This structure effectively restores the benefit of the lost state and local tax deduction to the extent of the contributions for most taxpayers who itemize.
Governor-elect Murphy will take all necessary steps to ensure municipalities have the tools they need to implement this strategy at the local level. Mayors Swain, LaBarbiera, and Misciagna, all plan to propose this tax cut solution in their respective towns.
Many other states, from Alabama to California to South Carolina, have created similar programs. The framework of this plan has already been supported by the Internal Revenue Service (IRS) and various tax courts. A list of other programs and IRS guidance and rulings can be viewed here.
Currently, there are more than 30 tax credit programs in 22 other states around the country. For example, Alabama and South Carolina use this structure for tuition tax credits. California’s program supports scholarships for lower income students, while Colorado has a program that supports donation of property for conservation purposes.
Congressman Gottheimer and Governor-elect Murphy have been on the front lines against this Tax Hike Bill and have committed to fight back for New Jersey. Every Republican and Democratic member of the state’s congressional delegation, but for one, voted against the Tax Hike Bill. The New Jersey Chamber of Commerce, the New Jersey Bankers Association, the New Jersey Realtors, and the New Jersey Business and Industry Association, along with law enforcement and state and local officials across the state, opposed the legislation.
“In Jersey, we don't just take a punch and snake away to the corner. No, we stand up and fight,” said Congressman Josh Gottheimer. “Today, Jersey is fighting back against the Moocher States with a Tax Cut Plan that actually helps people who live in New Jersey. I ran for Congress to cut taxes for our residents and businesses.”
“The Tax Hike Bill can only be seen one way—as an assault on New Jersey—paid for on our backs. It’s a huge windfall for what I call ‘Moocher States,’ those like Mississippi and Alabama, that pay far less in federal taxes than we do, and somehow consistently get far more back,” said Gottheimer.
“Before this disastrous federal tax hike bill passed, I committed to fighting tooth and nail for the people of New Jersey, and today marks the first step in that journey,” Governor-elect Murphy said. “The plan we are announcing today is a simple, innovative way for us to stand up for New Jersey taxpayers. I thank Congressman Gottheimer for his efforts in bringing this plan to fruition.”
“We all know New Jersey is a donor state - sending disproportionately more money to the federal government than it receives back in federal services – and the Republican tax bill only exacerbates that problem. Thankfully we have Phil Murphy in office to fight back. I will work hand-in-hand with him to make sure we blunt the impact of this terrible law on our residents,” said Congressman Bill Pascrell.
“We just do everything possible to cut taxes for New Jersey families and businesses. We need creative solutions to fight back against the Moocher States. The Tax Cut Plan, proposed by Rep. Gottheimer and Gov-elect Murphy, is the type of fight we need here in Paramus,” said Paramus Mayor Rich LaBarbeira.
"I’m really happy to be working with Congressman Gottheimer and Gov-elect Murphy on finding ways to cut taxes and save money for our taxpayers. It’s their creative thinking on combatting the Tax Hike Plan that will help families in Fair Lawn and throughout the state of N.J.,” said Fair Lawn Mayor Lisa Swain.
“Thank you to Congressman Gottheimer and Governor-elect Murphy for their efforts regarding the Tax Hike Bill and its impact on New Jersey. It’s refreshing to have both State and federally elected officials that answer the phone when a local official calls,” said Park Ridge Mayor Keith Misciagna. “As the Mayor of Park Ridge I can say our residents’ number one concern is taxes and now with the new federal Tax Hike Bill, our residents are worried. New Jersey is already an expensive state to live in and without some action on our part, these changes will drive people out of our state.”
To view a one-page summary of the Tax Cut Plan, click here.
To view the a detailed addendum on the Tax Cut Plan and the IRS Memorandum, click here. To view a list of existing state charitable tax credits, click here.
Gottheimer’s remarks as prepared for delivery below:
CONGRESSMAN JOSH GOTTHEIMER
REMARKS ON CUTTING FEDERAL TAXES FOR NEW JERSEY
FAIR LAWN, NJ
January 5, 2018
I want to start with a word about the loss of our good friend and Former Governor, Brendan Byrne. For many years now, I have been lucky to join so many in calling the Governor and his family friends. Governor Byrne was a true leader who made tough decisions for our state and he will always be remembered fondly by me and by the people of New Jersey. Above all, Brendan had a great sense of humor and nobody loved New Jersey more. Our thoughts and prayers are with his wonderful family.
When it comes to taxes, at this point, we all know the deal. At the end of last year, Congress took a two-by-four to our state – passing a Tax Hike Bill which gutted the state and local tax deduction, or SALT, sharply limiting our property tax deductions, cutting our property values, and imposing a massive tax hike on our families and businesses. The Tax Hike Bill also eliminated home equity loan deductions, and slashed the mortgage interest deduction. To boot, the legislation adds $1.5 trillion to our national debt, at a time when the debt exceeds $20 trillion. SALT has been around since 1913, to protect states’ rights, and to prevent Washington from undermining local priorities, like our schools and first responders.
According to experts, the Tax Hike Bill will push jobs and people out of our state and send property values down by ten to twenty percent. That’s why every single Democrat and Republican in our congressional delegation, but for one, voted against the Tax Hike Bill, and why everyone from mayors, to law enforcement, to the president of the New Jersey Chamber of Commerce came out swinging against it, stating, “This proposal is exactly what we do not need at this time.”
If you are a widowed, retired senior in Allendale on a fixed income, your taxes will go up by more than $1,000 a year. If you’re a cop and a teacher living in Paramus and you own a home, your taxes are going up by more than $5,000 -- this year.
As the New Jersey Bankers Association aptly put it, the Tax Hike Bill, “will accelerate the outward migration of New Jersey citizens to other states and discourage borrowing and capital investment.” Real estate prices are already down and deals are falling apart. Florida is already running ads to lure away our residents and our jobs. United Van Lines reported this week that New Jersey is the second most moved from state in the entire country – moving trucks are leaving, not coming.
And if you need any more proof that New Jersey homeowners totally get how they’ve been hosed by this Tax Hike Bill, look at what happened last week. With little time to prepare, thousands of homeowners, including families like Mary Jo and Michael Dervos from Glen Rock, who are both here today, took time off from work or their holiday break to stand in line at towns halls across the state for the privilege of scraping together enough dollars to pre-pay their property taxes. They get what’s been done to them.
That’s why I say in no uncertain terms: we have had more than enough. New Jersey residents are overtaxed and we can’t afford any tax increases. We need to cut taxes, which is why we are here today.
The Tax Hike Bill out of Washington can only be seen one way – as an assault on New Jersey – paid for on our backs -- and a huge windfall for what I call “Moocher States,” those like Mississippi and Alabama, that pay far less in federal taxes than we do, and somehow consistently get far more back. Now, the Moochers reached into our wallets again and have taken even more. It’s highway robbery. It’s why the day of the vote last month, a Moocher State congressman looked at me with a big grin and exclaimed, “Today is the day we get to stick it to the Northeast!”
So, now, what are we going to do about it?
In Jersey, we don’t just take a punch and snake away to the corner. No, we stand up and fight. Today, Jersey is fighting back against the Moocher States with a Tax Cut Plan that actually helps people who live here in New Jersey. Because, let me tell you, I ran for Congress to cut taxes, because, frankly, it’s simply too expensive to live and do business in our state. We are already the highest tax state with too much red tape — and are ranked 49th or 50th in business friendliness. It’s got to change.
Since my grandfather always told me to complain with a solution, here’s what we are going to do about it.
First, a few weeks before the vote on the Tax Hike Bill, Republican Congressman Leonard Lance and I brought a common sense, realistic, bipartisan tax cut plan to the Conference Committee, with broad support from Democrats and Republicans, that would cut taxes for people and businesses, double the standard deduction, cut the deficit, and save the State and Local Tax Deduction. It would have kept our housing market on the road to recovery.
And unlike the Tax Hike Bill signed into law, our bipartisan plan wasn’t smoke and mirrors. It was reviewed by the experts, and it was endorsed by the New Jersey Chamber, the National League of Cities, the National Association of Counties, and the US Conference of Mayors.
The Moocher States didn’t care. Despite having handed them a bipartisan, fully-vetted, fiscally-responsible plan that truly cut taxes – they still couldn’t help themselves. They needed to stick it to New Jersey to pad their own pocketbooks.
The second step we can take to lower New Jersey property taxes is to make sure we fight to claw back every single nickel we can in federal grants for things like fixing our roads and bridges, and support for firefighters and cops to fight crime and lone wolf terror. I’m standing shoulder-to-shoulder with the mayors here today and from across North Jersey to claw back these federal funds. And I already know Governor-elect Murphy will be a true partner in the fight for federal resources for our transit, schools, firefighters, cops, and more. We won’t let the Moocher States take these grant dollars without a fight on our watch.
Finally, for the big, new idea.
Today, I’m proud to announce another innovative, pro-growth idea – a Tax Cut Plan -- that will actually cut taxes for us, here in New Jersey, and help lessen the blow of losing the State and Local Tax Deduction. And I’m pleased that the Governor-elect is getting behind it so strongly and looking for solutions – and that the mayors here today will bring it to their town councils to help cut taxes for their residents.
Let me briefly explain how the Tax Cut Plan works.
Under the new Tax Hike Bill, New Jerseyans can only deduct a maximum of $10,000 of state and local property taxes from their federal taxes. For example, if you live in Oklahoma City, in a Moocher State, where the average home costs $142,000 and the average property tax bill is $1,420, that’s no big deal. You’re covered. But, in Fair Lawn, N.J., the average home costs $419,000 and the average property tax deduction is $13,144. So, under the Tax Hike Bill, if your state income tax is $10,000 and you lose that $13,144 deduction, and if you are in the 25% tax bracket, you’re now facing a $3,250 increase on your taxes.
Here’s a way to help eliminate that new increase – and actually cut taxes -- and do so in a way that twenty-two other states, including South Carolina and Alabama, strong red states, are already doing to help save their taxpayers dollars.
Towns like Fair Lawn, Park Ridge and Paramus can set up a town charitable general fund that helps pay for everything from police to streets to schools. And for those who make charitable contributions to that new charitable fund, the town is welcome to give tax credits to their residents on their property tax bills. The state is open to do the same for state income tax bills.
When you make a charitable contribution, and itemize your taxes, like more than half of the people do in the Fifth District, even if you fall into the AMT, you can take a deduction on your federal taxes.
The good news: the IRS has ruled on a version of this and has given it the thumbs up, and I’ve posted their rulings on my website. Again, our research has shown that there are more than thirty tax credit programs – taking advantage of the charitable deduction -- around the country, in twenty-two states, that work in basically this same way.
So, let’s go back to our Fair Lawn example. Instead of paying more than $13,000 in property taxes, that family in Fair Lawn could make a charitable contribution of the $13,000 to the Fair Lawn General Charitable Fund, and if the town provided a tax credit for all or part of the contribution, their costs could be mostly or fully offset by the tax credit. All of a sudden, every penny of the payments made by the taxpayer, the $13,000, would become fully deductible for federal tax purposes – under the federal charitable deduction. While the total paid out of pocket wouldn’t change, there would be a substantial tax cut in their federal taxes – as much as five thousand dollars, depending on your bracket.
Yes, it may seem too good to be true, but this is exactly the kind of tax planning we need in the face of this assault on New Jersey. Why wouldn’t we do everything possible to cut taxes for our hard-working families and businesses especially if other states do it and the IRS has approved it.
There is very strong authority supporting these programs and it would be very hard for the IRS to retreat from programs it has been supporting for years, unless it wants to take away this tax relief benefit in twenty-two other states – mostly red states, I’d add.
And absolutely no new federal legislation will be required for these programs.
In Mississippi, a Moocher State, the tax code allows folks to donate their land for recreational and conservation purposes – something the government would typically spend tax dollars on. The contribution generates a tax credit that partially offsets the cost of the contribution. So, anyone who makes the contribution gets a state tax credit plus a federal tax deduction in return. In Arizona, contributions into approved groups that pay for foster care – a role that the government often plays – are offset by a tax credit equal to 100% of the contribution. That is, for every dollar an Arizona taxpayer contributes – they receive one dollar back on their state tax bill with one difference – they can receive a federal tax deduction. In Alabama and South Carolina, they offer tax credits for tuition payments, through a scholarship fund.
Thanks to the Governor-elect and mayors here working to fight back, we can hit the ground running this year. We can try to blunt the impact of losing SALT by bringing this new Tax Cut idea to their respective Town Councils. Governor-elect Murphy is also eager to dig into the Tax Cut Plan at the state level. I spoke to Senate President Sweeney and Senator Paul Sarlo, the Senate Budget and Appropriations Committee Chairman, who’s from our county, and they are both supportive of this approach to cut taxes and will introduce any necessary legislation. We are here today to tell you that we are committed to bringing this tax cut idea to every single one of the seventy-nine towns in the Fifth District – and indeed throughout all of New Jersey.
Just before the Tax Hike Bill passed, I received an e-mail from a constituent, who told me that if the legislation became law, the loss of his property tax deduction would probably force him to sell his home and leave the state. Now, he’s leaving. These are the stakes. Families and businesses being forced out of New Jersey. Our Tax Hotline has been ringing off the hook for months, our mailbox and email has been filled with a huge number of similar concerns.
The Tax Hike Bill Congress passed last year is ticking time bomb for New Jersey. But today, we are proudly declaring that New Jersey won’t shy from a fight. We won’t be America’s piggy bank. And we won’t stand by and allow our economy to crumble. With today’s Tax Cut plan, we are telling the rest of the country that we will always stand firm for New Jersey’s values, and protect the families, the communities, and the state we love so much.
Thank you, happy New Year, and may God bless the United States of America.