Above: Gottheimer, flanked by Mayor Kurt Peluso (left) and Assemblywoman Lisa Swain (right) announces the Preserve the Charitable Deduction Act
FAIR LAWN,NJ– On Monday, April 1, 2019, U.S. Congressman Josh Gottheimer (NJ-5) announced new legislation, the “Preserve the Charitable Deduction Act,” that will stop IRS regulatory overreach. When passes, it will allow New Jersey towns like Fair Lawn and its residents to utilize the charitable tax deduction that 33 other states, mostly red states, have been utilizing for decades now. Last year, after NJ passed legislation allowing for towns to set up charitable funds, the IRS, without any legislative basis, issued provisional rules that would severely limit the state’s ability to offer tax relief — not to mention curtail the tax benefits in other states. Fair Lawn is one of the towns in New Jersey that passed a resolution in favor of setting up a charitable fund, but, under the IRS’s proposed new rules, cannot move forward with their plans. Gottheimer was joined by Assemblywoman Lisa Swain and Fair Lawn Mayor Kurt Peluso, who is ready to utilize the charitable tax deduction.
“Simply put, Congress didn’t give the IRS permission to interpret the tax law as they see fit, which they are trying to do by dismantling the charitable tax deduction. Their new, proposed cap is not in last year’s tax legislation — no one told them to do it. Yet, now, they’ve gone ahead and punched us in the gut. Ironically, this time, they’re also hitting the thirty-three states who’ve been utilizing the charitable provision for decades. The legislation I’ll be introducing in the coming weeks will stop the IRS in their tracks, so that towns like Fair Lawn can allow its residents to utilize the charitable tax deduction – and finally get real tax cuts. It’s long overdue,”said Congressman Josh Gottheimer (NJ-5).
Gottheimer, alongside Peluso and Swain, pushed for New Jersey to deploy the new charitable tax deduction after extremists in Congress passed the Tax Hike Bill last year, gutting the State and Local Tax deduction and capping it at $10,000. The average tax payer in Bergen County claimed $24,783 in State and Local taxes. In Sussex County, the average taxpayer claimed $14,267. In Warren County, $12,588 was the average amount claimed, and in Passaic County the average taxpayer claimed $14,714.
For example, for decades, Red States like Alabama, Montana, South Carolina, and Georgia allow their residents to utilize the charitable tax deduction for their private school tuition, and give their residents back a full 100 percent of their contributions as a state tax credit.
A grid of the states who use the charitable tax deduction and what they use it for can be found here.
Video of the event in Fair Lawn can be found here.
Below are Gottheimer’s remarks as prepared for delivery:
Thank you Mayor Peluso and Assemblywoman Swain for fighting for all of New Jersey from here in Fair Lawn, where we first announced the charitable Tax Cut Plan.
About a year ago, the hardliners in Congress jammed through a partisan federal Tax Hike Bill that particularly stuck it to a few states, especially ours. The Red States made out like bandits and got a bunch of tax relief for themselves – and we in Jersey paid for it.
In fact, the only way they footed the bill was to gut the State and Local Tax Deduction, capping it at $10,000 — imposing a massive Tax Hike on Jersey families and businesses. They literally took more than $668 billion dollars out of our pockets here in the SALT states for their tax relief.
Then, last year, when our state passed legislation to do exactly what their thirty-three other states had been doing for decades – to utilize the charitable tax deduction to provide relief to our residents – the IRS decided to step in and stick it to us, yet again. This actually happened. I know it sounds like it, but this is not an April Fools joke.
I’m here today, just weeks before April 15th, to let the IRS know that we will keep fighting back against their outrageous, bureaucratic overreach. This time with legislation — the “Preserve the Charitable Deduction Act.”
Simply put, Congress didn’t give the IRS permission to interpret the tax law as they see fit, which they are trying to do by dismantling the charitable tax deduction. Their new, proposed cap is not in last year’s tax legislation — no one told them to do it. Yet, now, they’ve gone ahead and punched us in the gut. Ironically, this time, they’re also hitting the thirty-three states who’ve been utilizing the charitable provision for decades. The legislation I’ll be introducing in the coming weeks will stop the IRS in their tracks, so that towns like Fair Lawn can allow its residents to utilize the charitable tax deduction – and finally get real tax cuts. It’s long overdue.
As you know, gutting SALT has had a real impact on districts like ours. Here in Bergen, the average taxpayer claimed $24,783 in State and Local Taxes – more than half of which is now subject to double taxation under the new law. In Fair Lawn, as you heard from Mayor Peluso, the median taxpayer’s bill exceeds that $10,000 cap. In Sussex County, the average taxpayer claimed $14,267. The same for Warren and Passaic Counties. So, when you consider that the new cap is $10,000, a super majority of my District is facing double taxation on April 15 – and will now be paying higher federal taxes than before.
The New York Times reported that 11 million tax filers this tax season won’t be able deduct $323 billion in state and local tax payments that they previously could. It’s offensive.
There is a reason why every Democrat and Republican in our congressional delegation – save for one — voted against last year’s Tax Hike Bill. The New Jersey Realtors came out against it. Tom Bracken, the head of the New Jersey Chamber of Commerce, said that, “being against this … [is] about as pro-New Jersey as you’re going to get right now.”
The impact of gutting SALT has been clear. Beyond higher taxes for way too many Jersey families, millennials and businesses are moving out — twice as many people moved out of New Jersey in 2018 as moved in. The number one state in the nation for outmigration. Not exactly something you put on a bumper sticker.
Higher taxes are stifling economic growth for our region and decreasing property values, which are already falling. According to Moody’s, because of the SALT cap, property values in New Jersey will be down by more than ten percent. A recent Zillow study drew a similar conclusion – since the Tax Hike Bill, home values in low-SALT states are rising much faster than in states like ours.
That’s why I’m working with Congressman Lee Zeldin from New York and others on bipartisan legislation to fully reinstate the SALT deduction and avoid double taxation.
The state of New Jersey is also a member of multistate lawsuits seeking to overturn the SALT Deduction Cap on constitutional grounds. Attorney General Grewal is also leading a coalition of states against the IRS’s efforts to upend the charitable tax deduction, the specific focus of my remarks today.
As I mentioned earlier, while we haven’t here in New Jersey, thirty-three other states have been utilizing this provision for decades.
For example, for decades, Red States like Alabama, Montana, South Carolina, and Georgia allow their residents to utilize the charitable tax deduction for their private school tuition, and give their residents back a full 100 percent of their contributions as a state tax credit. Not 90 percent like our law – but 100 percent. Think how much money their residents are saving on their state and federal taxes, while we’ve paid their bills. It’s the ultimate Moocher State move.
So, last year, here in Fair Lawn, then-Governor-elect Murphy, Senate President Sweeney,Assembly Speaker Coughlin, and Budget Chairman Sarlo and I said if these states can, and have been, doing it for decades – shouldn’t we utilize the charitable tax credit? What about our tax payers?
Together, we unveiled the New Jersey Tax Cut Plan, which the Governor later signed into law. It allows towns to give up to a 90 percent property tax credit to residents who donate to new charitable funds created in their towns. New charitable funds to support community expenditures like law enforcement, parks, and education. Just like in Alabama and Mississippi, taxpayers can then take a federal charitable tax deduction on their returns, even if they fall under the AMT, offering them new tax cuts in the face of last year’s federal Tax Hike Bill.
In August, the IRS – who for decades had allowed these charitable funds and given them a thumbs up – not to the mention the courts that had also ruled in their favor — announced that they would only recognize tax credits that were up to 15% of the charitable gift. In other words, in a massive regulatory overreach, the IRS suddenly changed its mind, targeting new adopter states like ours, plus New York, Connecticut, California, Maryland, and Illinois. But guess who else just got stuck with the IRS’s new aggressive, tax-hiking tactics? Our new friends in this fight — the thirty-three states that have been utilizing the charitable tax deduction for decades. That’s going to really hurt them, not only us, on Tax Day. We need to stop the regulatory-crazed bureaucrats at the IRS before they finalize this 15 percent provisional rules first announced in August.
That’s why I’m working on bipartisan legislation to ensure that these charitable deductions cannot be subject to the IRS’s regulatory overreach, and, just like 33 other states, fully enable our towns to put into place the new law passed in our state last year. We need to be aggressive, and I appreciate the Governor, the Treasurer, and the Attorney General doing everything they can here to fight the IRS and their overreach. We all plan to work together, including many of the affected thirty-three states, to stand up to the IRS before they finalize this new rule capping the charitable deduction at 15 percent.
I have heard from cities and towns across New Jersey, including from Mayor Peluso, that the uncertainty between New Jersey’s codified law and this capricious rule is stopping them from deploying the charitable deduction for their residents. My legislation aims to provide this much needed certainty and, once and for all, give people the tax cuts they need and deserve. Our families and our businesses simply can’t afford tax increases at any level.
When I go back to Washington, I will continue building a coalition of cosponsors from the thirty-three other states affected by this rule, who want to fight back. And I’ll continue to work to reinstate the SALT deduction, stop double taxation, and actually lower taxes for North Jersey.
It’s time for both sides to work together – Democrats and Republicans – to get this all done. It’s just common sense. Working together, we can cut taxes – and bureaucracy – while fighting to keep and bring new jobs to Jersey. We can fix our roads, bridges and tunnels – and keep our air and water clean. We can get health care premiums downs and make prescription drugs more affordable. We can stand by our vets, our cops, and first responders.
We are blessed to live in beautiful, safe communities like this one, in a state we all love so much. If we work together, I know that, in the greatest country in the world, our best days will always be ahead of us.
Thank you, God bless you, and may God continue to bless the United States of America.