Today, Congressman Josh Gottheimer (NJ-5) stood up against the elimination of the state and local tax (SALT) deductions alongside New Jersey Fair Law residents Denise and Baruch Gadot in Fair Lawn.
“Today, we have to stand up and defend New Jersey – those who, once again, want New Jersey to be America’s piggy bank. We need lower taxes and cannot afford a tax hike of $3,500 per person in Jersey by eliminating the state and local tax deduction. It’s anticompetitive and will drive people and business to other states. We can’t raise the tax burden on all of us in New Jersey, putting our jobs, businesses, and economy at risk,” said Congressman Josh Gottheimer (NJ-5).
Below: Congressman Gottheimer stands with New Jersey taxpayers to call the elimination of state and local tax deductions a “Raw Deal for North Jersey.”
Congressman Gottheimer’s remarks can be found below:
There’s a reason families like the Gadots have stayed in Fair Lawn and in New Jersey. There’s no better or safer place to raise a family. We’ve got the best public schools, beautiful parks, and, of course, the best bagels and pizza.
But today we have to stand up and defend New Jersey from the latest attack on our economy and families — those who, once again, want New Jersey to be America’s piggy bank. Today, we are here to say yes to lower taxes, but no to getting there by eliminating the state and local tax deduction. No to those who want to get lower taxes by, in effect, raising the tax burden on all of us in New Jersey, putting our jobs, businesses, and economy at risk.
When you look at the math, and review the tax map, you quickly realize that New Jersey is a grand subsidizer of other states. This is something that I’ve been talking about for years now. To those states who pay less than they take back – to those states that I call moocher states – we are not your piggy bank. These states take, take, take from us and expect us to keep giving.
Well, it’s time to draw a line in the Jersey sand — it’s time that states pay their own way and stop taking tax handouts from us.
Let’s talk about these handouts to other states.
First, we send far more to the federal government in taxes than we get back. We are one of the top three percent tax paying districts in the country – way too high, in my opinion. Yet, we only get back 33 cents for every dollar we send to Washington. Compare that to West Virginia: $4.23, Alabama: $3.02, South Carolina: $3.05, and Mississippi: $4.70.
I’ve been working overtime to get our return on investment up – to claw back more of those dollars we send to Washington and get more back, so we can get our property taxes down at home. I’ve been working closely with towns to get more back — grants for roads and bridges, for fire trucks, for protecting our police officers and our communities from lone wolf terror. We’ve already clawed more than $50 million – exceeding my predecessor at this point.
What happens when we get back fewer of our tax dollars than we pay in? And when West Virginia and Alabama get more back from the federal government than they pay in? Simply: it means that our local and property taxes have to pick up the burden – have to pay for more of our fire trucks while we are subsidizing these other states. It puts us at a competitive disadvantage when we try to get a new business to start up or move to New Jersey or try to convince a young family to settle here.
One saving grace that we’ve always had – or at least since 1913, I believe – is the state and local tax deduction – the ability to deduct those higher state, local, and property taxes before we had to send in our tax checks to the IRS every April. This makes sure that nobody experiences double taxation on their income, by paying taxes on the same income to New Jersey and to the federal government.
But now, to add insult to injury, and once again favoring one state over another, this week we saw the next phase in a plan for the moocher states to try and stick it to us again by, as the plan lists, “eliminating the deductibility of state and local taxes.”
What’s interesting that if you read the tax plan draft released on Wednesday, there weren’t many specifics. We’re still waiting on the full details. But there was that key sentence: eliminating a tax deduction that’s key to states like ours. The plan tries to start paying for itself on the backs of Illinois, New York, Pennsylvania, Texas, California, just to name of few. New Jersey is at the top of the list. Yup, an entire plan handed to Congress in vague generalities except for one: ‘Hey, New Jersey: Take a hike.’
I’m sure that provision was written by people from the moocher states. The chairman of the committee is from Texas — Texas gets $1.19 more back from the federal government than they pay in taxes. In fiscal 2009, the IRS collected about $163 billion from Texans and the state received about $224 billion, for a net gain of $61 billion. And leadership from Kentucky gets $2 for every dollar they send. Leadership from Wisconsin gets $1.75 for every tax dollar they send.
Don’t get me wrong: There are a lot of things in the tax proposal that I like. I ran on lower taxes and Jersey values. I want tax cuts – I want a simpler tax code that closes loopholes and lowers rates – especially lowering taxes on people and businesses of all sizes. One that moves to a terriotiral system. Our taxes are simply too high and our seventy-five thousand page tax code requires a PhD to understand.
But it must be the right tax reform. It must be bipartisan. It must lower rates. It must be pro-job and foster economic growth – and fiscally responsible. It must provide tax relief for hard working families who play by the rules. But there’s one provision that’s a poison pill – a line in the sand — eliminating the state and local tax deduction – and it’s against Jersey values. It favors one state over another, it’s double taxation, and it risks pushing people and businesses from New Jersey to states like Florida.
I will not support a plan that claims to gives to us relief in one hand and takes more of our tax dollars with the other. I will support a tax plan that lowers taxes and stands by Jersey values, not one that taxes us on the taxes we are already paying.
And the math is simple.
Eliminating the state and local tax deduction means an average $3,500 tax increase on all New Jersey residents. Yes, you heard me right.
The Fifth District faces even greater stakes: 43% – nearly half – of our taxpayers use the state and local tax deduction. Those taxpayers deduct an average of $18,535. It’s absurd that taxes on this home are $22,000 a year in the first place. Compare that to the average in Jacksonville, Florida of $1,623.
What’s that mean? Nearly twenty thousand dollars are on the line for half of North Jersey taxpayers. Ten percent of their gross income goes from their pockets to the tax chopping block. And here’s a key stat: 85 percent of those claiming the state and local tax deduction in New Jersey have household incomes below $200,000 per year.
Studies show that eliminating this deduction will drive down property values across New Jersey. The National Association of Realtors has said that eliminating the deduction, coupled with doubling the standard deduction – as this plan does – would “effectively nullify the current tax benefits of owning a home for the vast majority of tax filers.”
Relators are predicting a 10.2% drop in home prices – a drop in the value of beautiful homes like this one.
It’s no wonder Democrats and Republicans have already come out strongly against that part of the tax plan, including Republican Leonard Lance a few miles from here. There are more than 70 Republicans from states that will feel great pain from eliminating the state and local tax deduction.
This isn’t about rich or poor. It’s simply about a money grab from one state to another. It’s about picking winning states and those that get shafted. This provision is about pushing jobs and people from one state to another. The proposed policy is a huge competitive advantage for moocher states like Florida.
We simply can’t afford higher tax bills here in New Jersey, for our residents or businesses. We are already 49th in competitiveness and business friendliness because of our outrageous taxes up and down the line.
My fear if this gets through as is? Business will continue to leave, sending jobs and growth elsewhere. We already lost Mercedes and Hertz. What do they cite? Lousy roads and high taxes and high property taxes. Our manufacturing sector has flatlined and stopped growing.
Young people are leaving our state just as their careers are beginning. We experience the worst outmigration in the country – 67% – that means that net more people are leaving New Jersey than are coming into New Jersey. Ours is the worst in the country; people are leaving because it’s too expensive to live here.
The New Jersey Business and Industry Association estimates that New Jersey has lost $21 billion in adjusted gross income since 2004 just from people leaving the state. That’s 87,000 jobs, $13 billion in lost economic activity, and $4.6 billion in lost labor income.
In New Jersey, we haven’t seen a raise since 2011. Our incomes haven’t moved while the rest of the country gets a 5% raise.
Our GDP growth is way below national growth. The rest of the country is growing faster than we are.
The bottom line, as this chart shows, eliminating the state and local tax deduction is a raw deal for New Jersey.
It adds insults to injury, props up certain states that already steal our federal tax dollars, is double taxation, and will lessen our great state’s ability to be as competitive.
It’s the equivalent of tying our hands behind our back and throw us in the Hudson.
So, let’s take this anticompetitive, tax hike provision out of the tax reform bill that will hurt our businesses and people. Let’s pass a bipartisan bill that cuts taxes for people and businesses of all sizes. There is bipartisan support to get tax reform done the right way, but not one that’s done on our backs. That’s what I told the President when I saw him and what I’ll be fighting for in the weeks and months ahead.