Opinion: GOP tax bills are assault on New Jersey By Paul Sarlo
The tax bills written behind closed doors by Republican leaders and being rushed through the Senate and House without proper hearings are a pre-meditated assault on our economic competitiveness, our jobs, our prosperity and our housing values.
Both the bill that passed the House on Thursday and the legislation coming before the Senate would eliminate the federal income tax deduction for state and local income and sales taxes, eliminate or sharply cut the deduction for property taxes, and curtail other important tax deductions on which New Jerseyans depend.
The impact on New Jersey would be devastating.
Bergen County residents ranked 4th out of the nation’s 3,141 counties in the amount of their state and local tax deductions as a percentage of income. In fact, New Jersey has 14 of the 30 counties in the nation that would be hit the hardest by the elimination of these deductions, with Morris ranking fifth and Passaic 29th.
This means families will have thousands of dollars less to spend, which will blunt our economic growth and cut into state budget revenues too.
As state Senate Budget Committee chairman, I am acutely aware of the impact that tax policies have on whether families can afford to pay their medical bills or send their children to college, on whether to put an addition on their homes and on where to retire.
That’s why we worked so hard last year to pass bipartisan legislation to make New Jersey the only state in our region to phase out the estate tax, to raise the Earned Income Tax Credit for families having a hard time making ends meet, and to make up to $100,000 of pension, 401K and other retirement income fully deductible from state income taxes for our seniors.
We know that New Jersey is a high-cost state, and that we need to do everything we can to make our state more affordable.
That’s why the Republican tax bills are such a threat to the financial well-being and the quality of life of our residents.
In fact, the Republican bills are potentially so devastating that the New Jersey Business and Industry Association and the New Jersey State Chamber of Commerce both called upon our congressional delegation to vote against what President Trump and Republican leaders are touting as the biggest business and income-tax cut in history.
The Business and Industry Association said that “the tax reform plan would unfairly hit New Jersey residents the hardest via the elimination of state and local tax deductions, the limiting of property tax deduction to $10,000 and the reduction of mortgage interest deduction – which, in turn, would also negatively impact the housing market here.
“As already one of the highest-taxed stares in the nation, sending a disproportionate number of tax dollars to Washington, D.C., for what is received in federal aid or spending annually, the proposed plan simply adds to the affordability challenges we already face,” the business group said.
It is no accident that the Republican tax plan would unfairly hit New Jersey and states like New York, California and Illinois the hardest. Top of Form
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Right-wing Republican congressional leaders are openly rejoicing in the idea that the bills will punish high-tax “blue states” by taking away $1.3 trillion in state and local tax deductions to pay for their tax cut plan.
New Jersey already sends tens of billions of dollars more in taxes to the federal government than it gets back, and this tax plan literally robs from New Jersey and New York to give more money to red states like Texas and Mississippi that already get more aid and grants from the federal government than their taxpayers send in.
Eliminating the federal income tax deduction for state and local taxes amounts to “double taxation.” The federal government would effectively be taxing citizens on taxes they are paying to their state and local governments. That is why the deduction was included in the original 1913 income tax law passed when Woodrow Wilson, a New Jersey Progressive, was president.
It also breaks faith with citizens who counted on those tax deductions when they decided where they could afford to live, how large a house to buy, where to send their children to school, and where to retire.
The Wall Street Journal practically reveled in the fact if the Republican tax bill passes, “progressive states will have an even harder time” averting outmigration to low-tax states. Certainly, living six months and a day in Florida to establish legal residency or moving west to Pennsylvania will be a lot more attractive if state income taxes are no longer deductible.
Unquestionably, the value of the homes that are the biggest investment for many families will go down if the property tax deduction is eliminated, which the Senate bill would do, or if the property tax deduction is cut to $10,000 and new home buyers would only be allowed to deduct $500,000 in mortgage interest, as prescribed in the House bill that passed Thursday.
New home buyers have to calculate how much they can afford when buying a house. Millennials who have suffered in the slow job market that followed the Great Recession would not only have to pay more to become homeowners, but also would no longer be able to deduct the interest on the crippling college loan payments so many of them are carrying under the House bill.
The news on the health care side is just as bad. The House bill wipes out the medical deduction on which families with children with severe long-term medical conditions depend, and the Senate bill has inserted a partial Affordable Care Act repeal that will “save” $388 million by leaving 13 million more people uninsured.
This is not middle-class tax relief. It is an assault on the pillars of middle-class life.
We need to do everything we can to lobby against the bill in the Senate and, if the Senate bill passes, we need to ensure that our congressional representatives fight internally for restoration of these critically important – and fair – deductions when the bill goes to a Senate-House conference committee for final resolution.
And maybe some of the affluent New Jerseyans who golf at Trump golf courses can let the president know what this tax bill would really do.
Senator Paul Sarlo, D-Wood-Ridge, represents the 36th Legislative District and is chairman of the state Senate Budget Committee.