Today, Congressman Josh Gottheimer (NJ-5), New Jersey Senate President Steve Sweeney and New Jersey Senator, and Budget and Appropriations Chairman, Paul Sarlo discussed the advancement of the New Jersey Tax Cut Bill to the Senate floor, where, according to the Senate President and Budget and Appropriations Chairman, it will receive a vote on Monday.
Senator Sweeney and Senator Sarlo are the lead sponsors of S-1893, which will allow municipalities to set up charitable foundations to maintain the deductibility of full property tax payments from federal income taxes.
The text of S-1893 can be found HERE.
The legal basis for the Tax Cut Plan can be found HERE.
“In New Jersey, our taxes are too high. The rates need to be lowered for families and businesses alike. But the Tax Hike Bill just jacked up our federal taxes. The elimination of SALT is like a seven percentage point increase on many of the taxpayers in my District. That kind of tax hike doesn’t just hit our wallets. It’s enough that businesses and individuals are less likely to come to New Jersey and more likely to move away,” said Congressman Josh Gottheimer (NJ-5). “So today, we are making progress on the Tax Cut Plan we introduced in January in Fair Lawn, just miles from here in Paramus. Thanks to Senators Paul Sarlo and Steve Sweeney’s leadership, and strong and continuous support of our Governor, we now have a New Jersey Tax Cut Bill that is going to the State Senate floor for a vote next week.”
“The so-called tax reform law enacted in Washington will have a devastating impact on New Jersey and other states like ours. We have to fight back and take any actions we can to protect our residents,” said Senate President Sweeney. “This is a fight in which we are fully engaged, and I thank Congressman Gottheimer for working with us on this plan so that we are responding at both the state and federal levels. The sharp reduction of the SALT deduction for income, property and sales taxes hurts our residents, our economy, our housing values and our competitiveness.”
“The reduction of the SALT deduction is particularly egregious because, even before the reduction, New Jersey contributed far more in federal taxes than most other states,” said Senator Sarlo. “While some states receive more than $4.00 for every dollar they contribute to the federal treasury, New Jersey receives only about 67 cents. It is unfair and unaffordable for our middle class families.”
Below (left to right): Fair Lawn Mayor Lisa Swain, New Jersey Senate President Steve Sweeney, Congressman Josh Gottheimer, and New Jersey Senator, and Budget and Appropriations Chairman, Paul Sarlo.
Congressman Gottheimer’s remarks as prepared are below:
When it comes to taxes, at this point, I hope you know my position. I am for tax cuts and I believe that we need to do everything possible to make living in New Jersey more affordable for our residents and for our businesses of all sizes. Unfortunately, at the end of last year, Congress jammed through a Tax Hike Bill, gutting the State and Local Tax Deduction, or SALT, giving relief to some states, and dropping a huge tax hike on other states, like ours. The Tax Hike Bill gutted the State and Local Tax Deduction, amounting to a huge windfall for what I affectionately call “Moocher States,” those like Mississippi and Alabama, that pay far less in federal taxes than we do, and consistently get far more back from the federal government.
So, if you live in Florida, where there are no state income taxes, you loved this deal. You just got a tax break paid for by the state of New Jersey. That’s why Florida condo developers are running ads here to lure our people and businesses away, and why Pennsylvania towns, just across the border, have local committees literally dedicated to targeting specific companies to relocate there. Now, more moving trucks are leaving our state than showing up, and Moody’s recently declared that home values are already off more than seven percent here in New Jersey.
I agree with those who believe fiscal responsibility, at all levels, is essential. But I don’t need the Moocher States to try to teach us a lesson. Here’s my response: stop taking our handouts, stop stealing our tax dollars. Historically, for every dollar New Jersey taxpayers has sent to Washington, we get only 67 cents in support for our roads and bridges, law enforcement, veterans, and other critical resources.
Moocher States, on the other hand, like Mississippi or West Virginia get more than 4 dollars back for every dollar they send to Washington. Sounds to me like a giant welfare payment from us to many of the red states – and higher local taxes and a higher costs of living for us here in New Jersey. Well, I’m sick of New Jersey being the piggy bank for the Moocher States.
This isn’t a question of whether New Jersey’s taxes are too high or too low. They are too high. The rates need to be lowered for families and businesses alike. This is about how the recently passed Tax Hike Bill just jacked up our federal taxes when you do the math. The elimination of SALT is about a seven percentage point tax increase on many of the taxpayers in my District. Seven percent. That kind of tax hike doesn’t just hit our wallets. It’s enough that businesses and individuals are less likely to come to New Jersey and more likely to move away.
To put this in perspective, an individual here in Paramus making $120,000 a year would only have to make about $57,000 in Topeka, Kansas to have the same standard of living. Now, thanks to the Tax Hike Bill, that Kansas taxpayer will pay less than a 12% marginal tax rate, while the New Jersey individual will pay 24%. Does that make any sense?
That’s why it’s no surprise that every single Democrat and Republican in our congressional delegation, but for one, voted against the Tax Hike Bill. It’s 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.”
Well, in Jersey, we don’t just sit back and take a punch. We fight back. When the Moocher States stuck us with higher taxes, they rang the bell.
Now, when we discovered the charitable deduction, an opportunity to counterpunch and get tax relief here in New Jersey, I made four initial calls. Our mayors. Governor-elect Murphy. Senate Appropriations and Budget Chairman Sarlo. And the New Jersey Senate President – Steve Sweeney. I mean, wouldn’t you call this guy if you were going into a tax brawl? No one is tougher in the ring.
And, since moment one, we have deployed the muscle of a team of accounting experts, legal scholars, the IRS’ very own rulings and directives, Supreme Court opinions, and thirty years of precedent, to put the charitable tax deduction to work for our state.
Today, as you learned, we have great news about the progress that New Jersey has made on the Tax Cut Plan we introduced just a few miles from here. Thanks to Paul Sarlo and Steve Sweeney’s leadership, and strong and continuous support of our Governor, we now have a Tax Cut Bill in New Jersey that is going to the State Senate floor for a vote next week. And I know Assembly Speaker Coughlin is moving it, too, and we are all grateful. I’m hopeful, thanks to their excellent and remarkably fast, smart, and efficient work, the New Jersey Tax Cut Bill will become law this spring.
As you heard, the New Jersey Tax Cut Bill will enable state and local governments to establish charitable funds that pay for local services, such as public safety, parks and recreation and infrastructure. Taxpayers, if they choose to, will be able to make contributions to these funds. If they do, they will receive a tax credit from their local property taxes. We expect the contributions to be deductible for federal tax purposes under existing law, effectively providing a way to restore most of the benefit of the lost state and local tax deduction for most taxpayers who itemize – even if they would otherwise pay the alternative minimum tax.
Now, the naysayers have been out in force since we announced this tax cut plan for our state. Of course they are – they don’t want to see us succeed. But here’s the rub: thirty three other states, many of them dark red, from Arizona to South Carolina, have created programs built on the same principles utilizing the same tax code. And they’ve been around for decades. These programs are recognized by the IRS and the tax courts. There is even a Supreme Court decision.
Dig into tax law and you’ll see 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.
In early January, eight of the nation’s top tax law scholars published an academic paper, based on extensive legal precedent, supporting the federal tax treatment of the charitable contributions we are creating in this Tax Cut legislation. The paper surveyed more than 100 programs in 33 states.
In their paper, the scholars call the “Full Deduction Rule” that underpins our tax cut and the existing plans in 33 other states a “correct and long-standing trans-substantive principle of federal tax law.”
Put another way, if it works for thirty three other states, why not New Jersey? Congressman Leonard Lance and I brought this issue up directly, last week, with the acting IRS Commissioner. And he confirmed what we already knew – the IRS hasn’t ruled because they haven’t seen specific programs. But, it was clear, he knew that a well-designed program will be very hard to rule against without killing the programs in the other thirty three states.
Again, mostly red states. See, they’re in a bit of a pickle on this one. We will push the IRS for a ruling as quickly as possible, and the towns should structure their programs to protect the taxpayers in the unlikely event that the IRS decides to close all of these programs in all 33 states.
The Treasury Secretary doesn’t like the idea – but hasn’t been able to come up with a single reason why not. He won’t even answer my letter from January asking for an explanation. My guess is that he doesn’t really have one. He would have to undo the other programs in 33 states.
And now, thanks to Senators Sweeney and Sarlo, standing next to me today, we’re seeing real legislative action to cut New Jersey taxes.
We have many mayors on board who are ready to implement the plan outlined in the New Jersey Tax Cut Bill. In fact, even before the legislation was introduced, Mayors Swain, LaBarbiera, and Misciagna all said they planned to propose this tax cut solution in their respective towns as soon as the state law is passed.
This means real tax relief for New Jersey families.
My broader Tax Cut Plan for Jersey doesn’t stop there. I’m working to bring New Jersey businesses and families tax relief through every possible angle.
In January, I introduced the bipartisan Cutting Local Taxes by Reinstating SALT Act, legislation that would fully restore the state and local tax (SALT) deduction that the Tax Hike Bill repealed.
Congressman Lance and I also introduced bipartisan legislation to allow taxpayers to deduct all 2018 property paid in 2017, reversing the IRS. In December of last year, many people, in good faith and based on existing law, lined up to prepay their 2018 property taxes and save their families’ money. For example, in just one town, in Alpine, New Jersey, more than $3 million in property taxes were prepaid. But the IRS rushed a decision to limit the deduction for these payments on their 2017 returns for only half the year — a decision I believe was contrary to the law.
In our meeting with the IRS Commissioner, we urged the IRS to reverse course and follow the law – and allow for a deduction of all property tax payments.
I’m also fighting to claw back every federal dollar we send to Washington to increase our return on our federal tax dollar. Rather than send those dollars to Moocher States, let’s bring back them back home to help lower our property taxes, and support cops on our streets, fight crime and terror, rebuild our crumbling roads and bridges, upgrade our trains, and eliminate lead water in our kids schools.
We all need to work together, across party lines, to make living here in the greatest state more affordable. That starts with lower taxes for us here in New Jersey. And that starts today.
And I’d say to the other states – just remember: New Jersey fights back. If the federal government is going to try to pick our wallets, we’re going to do what Jersey does best– punch back. 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, God bless you, and now let’s get this done.