Offered as Sensible Alternative to Governor Murphy’s Charitable Contribution Scheme

A tax relief amendment offered by Senator Joe Pennacchio as a sensible alternative to Governor Phil Murphy’s scheme to mask property taxes as charitable contributions was blocked by the Senate today.

“Nobody in New Jersey is happy with the federal limitation of the SALT deduction to $10,000,” said Pennacchio (R-26). “Governor Murphy’s response, however, is a gimmick that is almost certain to be shot down by the IRS. There are more sensible approaches to tax relief that we can and must advance.”

The Governor’s proposal, S-1893, would allow homeowners to contribute to municipal charitable funds as an alternative to making property tax payments.

It’s an attempt to skirt the new $10,000 limit on the federal income tax deduction for state and local taxes (SALT).

A number of tax policy experts have warned that the federal deductibility of “donations” made under this scheme are almost certain to be disallowed by the IRS.

Pennacchio attempted to amend S-1893 during Senate debate on the legislation to replace it with a substitute bill incorporating the language of legislation he sponsors, S-413, to permit homeowners to deduct the full amount of their property taxes from their state income tax obligation.

“If we’re claiming the federal limit is bad policy, we should also acknowledge that New Jersey’s identical $10,000 limit on the property tax deduction that we allow state income taxpayers to claim is similarly bad,” said Pennacchio. “Our State cap is something that’s within our power to fix, and we should act to do so. To continue criticizing the federal SALT limitation while doing nothing to address our own limitation would be completely hypocritical.”

The Senate immediately tabled Pennacchio’s effort to amend the legislation.

“It sends the wrong message to our residents for legislators to push a scheme like this to evade federal taxes, especially when we don’t allow charitable contributions be deducted by state income taxpayers,” added Pennacchio. “Our taxpayers deserve real solutions that will cut their tax bills, but all they’ve been offered is a shell game that they are sure to lose.”