A Message To New Jersey Mayors: Take Steps To Save On Taxes
I have urged North Jersey mayors to act quickly and allow for property tax prepayments to help New Jersey taxpayers.
The recently enacted Tax Hike Bill, P.L.115-97, significantly revises the Tax Act of 1986, and among its provisions, drastically diminishes the ability for states like ours to deduct state and local taxes (SALT). It’s expected to hit our property values and other states are already trying to lure our businesses away. However, there is an important caveat: the changes, based on guidance we’ve received, specifically do not prohibit prepayment of state property taxes.
Since many taxpayers will not be permitted to deduct all of their property taxes in 2018 and beyond, I have urged mayors to act quickly, so taxpayers in their towns can prepay assessed property taxes this week — and potentially save significantly on their federal tax bill. As promised, as soon as the Tax Hike Bill was passed, I asked the IRS for guidance regarding prepayment. My office received a response from the IRS. Their guidance suggests — coupled with formally posted guidance — that New Jersey taxpayers can prepay their 2018 property taxes and temporarily avoid this disastrous provision of the Tax Hike Bill. The IRS advised that, “In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.”
The IRS note to my office added, “The new legislation specifically prohibits receiving a tax benefit in 2017 for the pre-payment of 2018 income taxes. We were concerned this might apply to property taxes as well, but it does not.”
In New York State, Governor Cuomo issued an emergency executive order last Friday facilitating prepayments in that state. You can read more about New York’s emergency order here. News reports indicate that Governor Christie is planning a similar executive action and I have contacted him to urge swift action and clarity for towns in North Jersey.
I want to save on taxpayers' money wherever possible, particularly in the face of this tax hike bill on North Jersey residents. This is about fighting for North Jersey and leaving no stone unturned to save more money for our towns and taxpayers. Several mayors have let me know that their towns are currently accepting prepayments. Please contact my office with any questions.
I am including the official guidance from the IRS below as well.
IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017
IR-2017-210, Dec. 27, 2017
WASHINGTON - The Internal Revenue Service advised tax professionals and taxpayers today that pre-paying 2018 state and local real property taxes in 2017 may be tax deductible under certain circumstances.
The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.
The following examples illustrate these points.
Example 1: Assume County A assesses property tax on July 1, 2017 for the period July 1, 2017 – June 30, 2018. On July 31, 2017, County A sends notices to residents notifying them of the assessment and billing the property tax in two installments with the first installment due Sept. 30, 2017 and the second installment due Jan. 31, 2018. Assuming taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on Dec. 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.
Example 2: County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018. County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019. However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year. Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.
The IRS reminds taxpayers that a number of provisions remain available this week that could affect 2017 tax bills. Time remains to make charitable donations. See IR-17-191 for more information. The deadline to make contributions for individual retirement accounts - which can be used by some taxpayers on 2017 tax returns - is the April 2018 tax deadline.
IRS.gov has more information on these and other provisions to help taxpayers prepare for the upcoming filing season.
In One New Jersey Town, Pending Tax Changes Create Anxiety
LIVINGSTON, N.J. — Politically speaking, Livingston is not the bluest of the suburbs surrounding New York City. But there are few places where people are feeling any more anxious about the potential impact of the federal tax bill proposed by Republican leaders in Washington.
“They’re crippling us,” said Walter Levine, who has lived in this New Jersey community since 1976.
As Mr. Levine sees it, Livingston, a fairly affluent town with a population of about 30,000, could become even less affordable as residents face rising tax bills and falling home values. They could be left with less disposable income to spend in the local stores, setting off a “domino effect” that could derail the town’s economy.
It is a dire forecast, but not a radical one. Livingston sits on the western edge of Essex County, which Moody’s Analytics, a company that provides economic research, placed at the top of its list of places whose housing markets would suffer the most under the Republicans’ plan. According to Moody’s, the tax proposal could carve as much as 10.5 percent off the projected value of homes in Essex County in two years. Six other New Jersey counties made the top 10 on Moody’s list.
Livingston’s Republican representative in Congress, Rodney Frelinghuysen, voted against the House version of the tax bill because, he said, of the “very negative impacts it would have on so many of my fellow New Jerseyans.”
In many ways, Livingston is a microcosm of all the forces that will collide in the heavily taxed towns that ring New York City when the proposed tax law takes effect. These are places that have drawn residents willing to stretch their budgets to cover big mortgages and high property taxes in exchange for good schools and a comfortable lifestyle, understanding that they could deduct their local levies and reduce their federal taxes. But the tax bill would radically alter that equation, forcing potentially painful choices in towns like Livingston. For some, the math just may not work anymore, driving them and their neighbors to reconsider the classic suburban dream.
“No one gets creamed more than New Jersey from this tax bill,” said Mark Zandi, chief economist for Moody’s Analytics. He said the state was particularly vulnerable because its homes are expensive, its property taxes are the highest in the nation and it also has a high state income tax.
“It’s going to put really severe fiscal pressure on local governments, and they’re going to be between a rock and a hard place,” Mr. Zandi said.
The tax bills passed by the House and Senate would take away people’s ability to deduct much of what they pay in state and local taxes from their income on federal tax returns. Those deductions would be limited to $10,000 in a combination of property taxes and other state and local taxes.
Those changes loom like a dark cloud over Livingston, where the average homeowner pays more than $15,000 a year in local taxes and many pay a multiple of that sum.
Mr. Levine estimated that his taxes would rise by $14,000 a year, just from the loss of deductions on the state and local taxes he pays. He said he anticipated more questions from his brothers about why he has not packed up and moved to Florida, as they did.
Indeed, the most frequently cited example of a refugee from New Jersey’s high taxes involves a former Livingston resident, David Tepper. Mr. Tepper, a wealthy hedge-fund manager, moved to Florida two years ago and took his business with him.
Elected officials in Livingston, who pride themselves on the town’s highly rated schools, broad array of services and ethnic diversity, worry that their town could lose some of its appeal. Rudy Fernandez, a council member and former mayor, said he feared that job-seekers would steer clear of Livingston and neighboring suburbs if they could not deduct the taxes they would pay to the state and local governments.
Shawn Klein, an ophthalmologist who serves as mayor, said, “We’re also worried about if there is a depression in the economy. How does that affect our local economy? Do we start having empty storefronts?
Cheryl Press, who runs a jewelry business with her husband, George, on South Livingston Avenue, said they had to “reinvent” their business after the financial crisis of a decade ago to emphasize service and repairs because customers had less money to spend. “We had that conversation this weekend,” Ms. Press said. “Are we going to have to reinvent ourselves again?”
On a recent weekday afternoon, one of the largest gatherings in Livingston was a group of about 100 people playing bridge in the V.F.W. hall. Many of them were from other towns, but they all seemed to share concerns about the tax bill making their lifestyles more precarious.
Richard Bindelglass, a retired executive from the Martinsville section of Bridgewater, a town south of Livingston, estimated that his federal tax bill would rise by about $5,000, an increase that would spur him to consider selling his house and moving. He said the local school system had already cut some programs to save money, but he expected the schools-or-taxes tension to grow.
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“I assume we’re going to get some anti-tax candidates for the school board with a mandate to lower the total spend and lower the tax,” he said.
Sumner Freedman, 73, a resident of Short Hills, another well-off town near Livingston, said the property taxes in his town were “ridiculous” and sharp cuts to the ability to deduct them would hurt the middle class in the region. He admitted that the $17,000 he pays in annual property tax indicated that his home was quite valuable. But, he added, “You can’t eat your house.”
The pending tax changes have been a prime topic of conversation this week among the diners at Eppes Essen, a Jewish delicatessen on one of Livingston’s main thoroughfares, said its manager, Jeff Lajqi.
Mr. Lajqi, a native of Kosovo, said some customers had called him conservative for saying that he did not mind paying taxes as long as the revenue was put to productive use. Then again, he admitted that he was among the minority of Livingston residents paying less than $10,000 in annual property taxes and could not relate to the concerns of some of his rich neighbors.
“If they’re raising the taxes, you know what’s going to happen: Everyone’s going to raise prices,” Mr. Lajqi said. Picking up a loaf of challah bread, he added, “Raise my taxes, I raise your challah.”
Still, some Livingston residents were more sanguine about the potential impact of the tax changes. Rajesh Agarwal, who commutes to Manhattan to work on Wall Street, took a financier’s approach to the situation.
“Property taxes always tended to be on the high side,” in Livingston and surrounding towns, he said. The question for people like him and his wife, Anju, will be: “How much incrementally worse off are you willing to be?” he said.
With one child in middle school and one at Livingston High School, where nearly one-quarter of the student body is of Asian descent, Mr. Agarwal said his family was unlikely to decamp for a place with a lower cost of living. “The school district and the town and the quality of life will probably rule the day,” he said.
Punam Bhargava, a real estate agent with Berkshire Hathaway HomeServices who said she had sold 180 homes in Livingston to Indian couples, including the Agarwals, was holding out hope that the proposed tax changes would not come to pass. She and her manager, Christian Quaritius, had just returned from an industry convention in Atlantic City where speculation of a price decline of as much as 10 percent was flying about.
Ms. Bhargava said the Livingston market has been so strong, she had trouble imagining a significant drop in demand. She said her office had sold more than 400 homes this year at an average price of $723,000, with most of them on the market for no longer than a few weeks.
“There are people that are just Livingston people,” she said. “They are not moving no matter what.”
But a precipitous spike in taxes could force some people’s hand. “I think there are homeowners that would sell,” Mr. Quaritius said. “But then the question is, where would I go?
Correction: December 17, 2017
Because of an editing error, an earlier version of a picture caption with this article misattributed a quote about reinventing a local jewelry business. As the article correctly notes, it was Cheryl Press who said it, not George Press.
Main Street Alliance Letter to Members of Congress RE: Tax Cut and Jobs Act
Americans Against Double Taxation Statement On Conference Committee Tax Agreement
Americans Against Double Taxation Statement On Conference Committee Tax Agreement Agreement Would Hurt Middle-Class Taxpayers - Non-Partisan Analysis Shows Proposed SALT Changes Do Not Fix Flawed Bills
Amid reports that House and Senate Republican leaders have agreed to a tax reform bill that would substantially cut the state and local tax (SALT) deduction by placing a $10,000 cap on a combination of property and income or sales taxes that could be deducted, Americans Against Double Taxation released the following statement:
“The substantial cut in the SALT deduction will raise taxes for homeowners in many states, drive down property values, and threaten funding for infrastructure and vital public services. The 11th hour deal by conferees to impose this $10,000 limit on a combination of state and local taxes that could be deducted does virtually nothing to alleviate the severe cost imposed on middle-class families caused by the partial elimination of SALT, which has been part of the U.S. tax code since its inception more than 100 years ago. We urge lawmakers to vote no on the conference report, as this is the only option at this stage to preserve SALT, prevent double taxation, and preserve the integrity of state and local finances.”
Independent, non-partisan analysis has shown the minor modification to SALT made by conferees would provide little relief for middle-class taxpayers; most current itemizers would not have sufficient eligible deductions to itemize under the new plan, yet they could still face tax increases. For instance, in California, the current average SALT deduction under present law is more than $23,000, exposing nearly $13,000 to double taxation.
Recently released polls have shown that restricting SALT is the least popular provision in the congressional tax reform plans, with voters preferring full preservation of SALT by a margin of 41-24%.
Americans Against Double Taxation is a coalition of state and local government organizations, service providers and other stakeholders dedicated to protecting the state and local tax deduction (SALT), a federal tax deduction claimed by 44 million American taxpayers that supports vital investments in infrastructure, public safety, home ownership and education. For more information, visit AmericansAgainstDoubleTaxation.org.
November 30, 2017
Members of the United States Senate
Washington, DC 20002
Members of the United States House of Representatives
U.S. House of Representatives
Washington, DC 20515
RE: Tax Cut and Jobs Act
Dear Members of Congress,
We, the undersigned small business owners, demand that you oppose the tax scam that is currently being consider by Congress.
The plan will ultimately slash programs that are vital for small business owners like me. Cutting Medicare, Medicaid, education, and infrastructure will have a devastating impact on my community and my business.
What small business owners like us need is for our communities to have affordable healthcare, well-funded schools, and well-maintained roads. The tax cuts and subsequent budget cuts do nothing to improve these things.
Elise Aronov – Montclair NJ – Aronov Fried Psychotherapy Group LLC
Mark Singer – Moorestown NJ – BioMediCon
Lee Blackwell – Elizabeth NJ – Blackwell Hollinger & Company
Carol Jagiello – Bloomingdale NJ – CAS, LLC.
Elisa Dell Amico – Ridgewood NJ – Elisa Joy Designs
Chris Shull – Cherry Hill NJ – Engaged Impact LLC
Nick Berezansky – Ridgewood NJ – Espresso Printing
James K Conklin – Glen Ridge NJ – Foley Waite LLC
Alan Sherman – Hopewell NJ – Sherman Educational Systems
Brian de Castro – South Orange NJ – The Gore 4
Kimi Wei – Fair Lawn NJ – The Wei
William Hines – Hackettstown NJ – Wild Lake Press, Inc
Tara Stewart – Somerville NJ – Words Unspoken, Photography
Edward Wilchins – Elizabeth NJ – Green Monkey Productions
Manuel Salvador – Sayreville NJ – Guitarcraft
Anthony Guzzi – Dunellen NJ – Guzzi Studios
Shoshana Osofsky – Bridgeton NJ – HeartPath Acupuncture, LLC
Dan Fatton – Trenton NJ – Ideal Image Consulting
William Hughes – Piscataway, NJ – NJ Ideal Touch Landscaping
Gail Joyiens-Salam – Rahway NJ – JS Transcription Service
Micah O’Keefe – North Caldwell NJ – Marital Solutions
Nicole Smith – North Haledon NJ – Nicole Smith Interiors
Pranab Duttaroy – East Brunswick NJ
Richard Kessler – NJ – Richard S. Kessler, P.E.
Rick Phillips – South Orange NJ – RPP LLC
Gilbert Wald – Bridgewater NJ – S A Wald Reconditioners, LLC
Susan Corcoran – Flanders, NJ – NJ School Psychologist
Kelly Conklin NJ
Richard Tardalo NJ
Alida Greendyk NJ
Jessica Sporn NJ
Deirdre Ryan NJ
Jack O'Connor NJ
Mary Stabile NJ
Dan Preston NJ
Erick Cedano NJ
Sarah McEwan NJ
Randy Ellis NJ
Jim Morel NJ
NEW YORK — Michael A. Peterson, President and CEO of the Peter G. Peterson Foundation, commented today on the release of tax legislation in the U.S. House of Representatives:
“Passing a bill to our kids is not the right way to pass a bill. This legislation is an example of fiscal irresponsibility. It is based on a presumption that it’s somehow acceptable to add $1.5 trillion to our national debt over the next ten years when we will already be adding $10 trillion as it is. We need to improve our dangerous fiscal outlook, not make it worse. No tax legislation that increases our national debt should be called pro-growth, because adding more debt hurts our economy.
“In addition, this bill includes gimmicks like arbitrary phase-ins and expirations that damage its fiscal credibility and undermine important objectives. Pro-growth reforms must be permanent to be effective. Business and individuals need certainty to plan and invest. The goal of tax reform should be to help the economy grow well into the future, not just temporarily with rules that drift in and out of the tax code.
“Lawmakers should use the valuable opportunity presented by tax reform both to improve our fiscal outlook and strengthen the economy at the same time. As this bill moves through the legislative process, lawmakers should look for ways to pay for their priorities. With $15 trillion of tax breaks and $46 trillion in spending over the next decade, there are many ways to find $1.5 trillion to offset the cost of this bill.”
Paralyzed Veterans of America “Deeply Disappointed” in New Tax Reform Plan
Organization cautions on provisions that undermine economic independence and community integration of veterans with disabilities
WASHINGTON, DC— 11/6/17 Paralyzed Veterans of America (Paralyzed Veterans) today reacted to the new tax reform plan via a strongly worded letter to U.S. House Ways and Means Committee Chairman Brady and Ranking Member Neal, saying in part that the provisions will “eliminate important sections of the tax code that directly affect veterans and people with disabilities.” While the letter went on to say the organization appreciates the efforts to effect broader tax reform, it reiterated caution on several key issues it had laid out in a similar letter to the committee earlier this year.
Citing serious concerns, including the repeal of medical expense deductions, work opportunity tax credits and credits for accessibility expenditures, Paralyzed Veterans Associate Executive Director of Government Relations Carl Blake today issued the following press statement:
“Only days away from Veterans Day, I cannot imagine a more disappointing message to the most catastrophically injured men and women who served our country than to hinder their financial independence, detrimentally affect their quality of life, or undermine the civil rights provided to them under the Americans with Disabilities Act (ADA),” he stated.
“Nearly 300,000 veterans benefitted from The Work Opportunity Tax Credit between 2013 and 2015, the large majority of whom are veterans who have served during the War on Terror since September 11, 2001. Additionally, the Disabled Access Credit is a vital tool in helping small businesses abide by the Americans with Disabilities Act,” he continued. “I’m certain Congress doesn’t wish to place further burdens on veterans and people with disabilities who face barriers to employment, impose financial hardships for medical expenses, or further compromise on outstanding compliance issues with our country’s critical disability law. We urge policymakers to find a better balance that doesn’t abandon our commitment to spinal cord injured veterans and all disabled Americans."
The House of Representatives passed a tax cut package today that will add $1.5 trillion or more to the national debt. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
The House approved debt-financed tax cuts based on predictions of magical economic growth that defy history and all credible analyses.
Tax reform should grow the economy and not add to the debt. Unfortunately, lawmakers are assuming faster economic growth will pay for that debt increase when there is no evidence it will cover more than a fraction of the tax bill’s costs.
The last time Congress added 10-figures worth of tax cuts to the debt in 2001, it blew a hole in the budget and helped erase our surpluses — despite claims that economic growth would cover the cost. The growth fairy did not appear then, and it would be unwise to assume she will this time around.
What is so stunning is that we are considering trying this again at a truly unprecedented moment in our fiscal history. When the tax cuts of 2001 were passed, debt was 31 percent of GDP, the nation was running budget surpluses, and we were on track to pay off our debt. Today, debt is 77 percent of GDP — higher than any time in history other than just after World War II — and trillion-dollar deficits are on track to return by 2022.
Already, we are projected to borrow another $10 trillion over the coming decade. The answer must not be to pile more debt on top of that.
This bill is a lost opportunity to truly reform the tax code in a way that would maximize economic growth by broadening the base and eliminating special interest tax breaks while lowering rates and modernizing our tax code.
Instead of trickling down economic growth, the House plan will unleash a tidal wave of debt that will ultimately slow wage growth and hurt the economy.
The AARP on HR1, the Tax Cuts and Jobs Act
The AARP on How H.R. 1 Could Negatively Impact People Over 65
International Association of Fire Fighters Letter to the House of Representatives
November 15, 2017
On behalf of the nation’s more than 310,000 professional fire fighters and emergency medical personnel, I am urging you to protect our nation’s first responders when voting tomorrow on tax reform. There are two specific provisions currently outlined in tax reform that the IAFF would like to see addressed before passage.
1) First, I urge you to protect state and local pension plans from unfair taxation by not applying unrelated business income taxes (UBIT) to plan investments.
Vital government services such as fire protection are provided for the public good, and have been treated that way in statute for decades. That is why current law protects state and local pension investments from taxes on unintended business income. H.R. 1 through amending section 5001 of the tax code would change this protection and retroactively apply UBIT to all appropriate pension plan investments.
This type of change would wreak havoc on pension plans whose long-term investments in part were based on UBIT not being applied. In addition to the revenue loss by pension plans and the federal government, the provision imposes significant and complex compliance costs that could impact portfolio construction and diversification of public funds. This plan would also diminish investment earnings, critical to proper pension funding by forcing the consideration of alternative and more costly investment structures.
Investment earnings pay for approximately two-thirds of state and local government pension benefits, which are taxed when distributed to participants across virtually every state, city and town in the nation. Subjecting public plans to the UBIT will result in a drag on these critically important investment returns, set a dangerous precedent for taxation of state entities and will ultimately increase costs to taxpayers.
2) Second, I urge you to protect the State and Local Tax (SALT) deduction which helps local governments effectively fund vital public safety services.
Fire departments are funded through local taxes that are levied at a fair rate, based on meeting the needs of the community. Eliminating the SALT deduction, one of the oldest provisions of the tax code, would result in higher tax liabilities for millions of middle class workers. To ease the burden of these new taxes municipalities and local governments are likely to lower taxes to levels that simply do not meet the needs of fire departments.
Proponents of eliminating SALT argue it only benefits the wealthy. The truth is that 40 percent of taxpayers with adjusted gross income between $50,000 and $75,000 claim the deduction while 86 percent of all tax payers claiming the deduction earn under $200,000 per year. Those working to eliminate the deduction claim it only impacts a select few in a small number of states, when in fact the deduction impacts all working-class Americans, both Democrat and Republican. For example, more than 90 percent of middle income taxpayers in Utah and more than 84 percent of in Texas claim the SALT deduction.
The partial repeal in the House plan would upset the carefully balanced fiscal federalism that has existed since the creation of the tax code, and it would result in unprecedented double taxation on taxpayers, forcing them to pay a federal tax on monies already paid in state and local taxes. It would effectively increase marginal tax rates and could lead to lower home values and cuts to critical services such as the ones provided by fire fighters across the country.
These issues especially, will have a detrimental impact on the fire service. The ability for our nation’s first responders to do their job and plan for an adequate retirement will be
significantly stunted if they were to be included in any final tax reform package.
Tomorrow, when the House begins to debate and then votes on H.R. 1, I urge you to support the full preservation of SALT and protection of public pension plans from UBIT.
Dear Mr. Speaker, Senator McConnell, Representative Pelosi and Senator Schumer,
I am writing on behalf of the members of the Fraternal Order of Police to urge you to protect the State and local tax (SALT) deduction in the current tax code. Our members put their lives and safety at risk to protect our homes, schools and communities. Their salaries and the equipment they use are paid for by State and local taxes on property, sales and income. These funds are then invested in our law enforcement agencies and the men and women serving in law enforcement.
The FOP is very concerned that the partial of total elimination of SALT deductions will endanger the ability of our State and local government to fund these agencies and recruit the men and women we need to keep us safe. In addition, our members are also citizens of the communities who work and pay these State and local taxes. The elimination of the SALT deductions, in whole or in part, will be deeply harmful to them and their families, effectively raising their taxes as much as $6,300 according to recent studies. The SALT deduction has been part of the tax code since it was originally drafted in 1913. Our members would certainly oppose any effort of the Federal government to tax their income twice by eliminating the SALT deduction.
On behalf of the more than 333,000 members of the Fraternal Order of the Police, I urge Congress to preserve the SALT deductions, to reject any effort to eliminate, in whole or in part, these deductions and oppose the final bill if these deductions are included. I thank you in advance for your consideration of our view. Please feel free to contact me or my Senior Advisor Jim Pasco if I can provide any additional information on this important issue.
The business group’s opposition was surprising given that the bill calls for the corporate business
tax to drop from 35 to 20 percent, a significant reduction that President Donald Trump and other
supporters have touted as a way to encourage business to expand and hire more employees.
Add the New Jersey Chamber of Commerce to the list of people and groups opposed to the
Republicans’ sweeping tax reform bill.
Tom Bracken, president of the state chamber, released a statement critical of the bill on Monday,
saying it would not provide a net benefit for New Jersey like it would other states.
“Any tax reform legislation should result in a net benefit for every state,” Bracken said. “The tax
reform legislation introduced last week would not be a positive for New Jersey. While some
citizens and businesses in the state would benefit, many more would not.”
The business group’s opposition was surprising, given that the bill calls for the corporate
business tax to drop from 35 percent to 20 percent, a significant reduction that President Donald
Trump and other supporters have touted as a way to encourage businesses to expand and hire
The bill also calls for the creation of a so-called “pass-through” business rate of 25 percent for
small businesses and partnerships that don’t pay the corporate income tax but whose profits are
passed through to the owners, who pay taxes on them at their individual tax rate.
The GOP bill would allow small businesses to use the lower rate on about 30 percent of their net
income. The remaining 70 percent would need to be taxed at the owner’s individual rate. It also
doesn’t allow some professional services businesses — such as attorneys, accountants and
architects — to take advantage of the lower rate.
That has drawn criticism from some national business groups such as the National Federation of
Independent Business, whose CEO, Juanita Duggan, said the bill “leaves too many small
“We are concerned that the pass-through provision does not help most small businesses. Small
business is the engine of the economy. We believe that tax reform should provide substantial
relief to all small businesses, so they can reinvest their money, grow and create jobs,” Duggan
U.S. Chamber of Commerce Senior Vice President Neil Bradley was more supportive, saying the
reform bill is “exactly what our nation needs to get our economy growing faster.” But Bradley
also cautioned that “a lot of work remains to be done to get the exact policy mix right and move
from a legislative draft to an enacted law.”
Bracken cited the bill’s elimination of the state and local income and sales tax deduction and the
proposed $10,000 cap on property tax deductions. Those changes have proved to be a battleground for members of Congress from New Jersey and other high-taxed states like New
York and Illinois, whose residents send more tax dollars to Washington than the state receives
back in federal aid or spending.
Bracken was also critical of a proposed change in the popular mortgage-interest deduction,
which allows homeowners to write off interest on home loans up to $1 million. The deduction is
staying, but the cap is proposed to change for newly purchased homes.
The changes to both those deductions could erode property values in New Jersey and scare off
businesses, he said.
“This proposal is exactly what we do not need at this time,” Bracken said. “This legislation
would make New Jersey less affordable and less competitive, and impede our ability to climb
back to an acceptable level of prosperity.”
Reaction to the tax legislation among the New Jersey congressional delegation has been mixed.
Democrats like U.S. Sens. Cory Booker and Robert Menendez and U.S. Rep. Donald Norcross,
D-1st of Camden, have been critical, arguing that the benefits are lopsided in favor of
corporations and the wealthy rather than the middle class.
Rep. Frank LoBiondo, R-2nd of Ventnor, has also said he would not support the bill as written,
largely because of the loss of the state and local tax deductions.
Rep. Tom MacArthur, R-3rd of Toms River, who led a group of lawmakers that was involved in
closed-door negotiations with Republican leaders, has said he is pushing for some changes
before the bill reaches the House floor for a vote, including to the mortgage interest deduction
cap and the pass-through business provision.
But MacArthur has said the $10,000 cap on the property tax deductions was a big step forward,
given that Republican leaders were previously committed to eliminating the deduction, and that
most taxpayers in Burlington and Ocean counties would fall below the cap.
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