March 3, 2018
Opinion: It’s time we punch back with a Jersey tax cut
By Josh Gottheimer
In December, Congress kicked New Jersey in the teeth by gutting the State and Local Tax Deduction (SALT), driving taxes up many in our District by seven percent and, according to Moody’s, sending our state’s property values down by 7.4 percent. In January, we did what Jersey does best – we started to punch back. We announced a New Jersey Tax Cut Plan that allows municipalities to establish charitable funds to pay for local services like public safety, parks and recreation and infrastructure. Taxpayers can make federally-deductible charitable donations into these funds, and towns can offer a tax credit of up to 90% on their property taxes — effectively restoring most of the benefit of the lost SALT deduction.
This week, thanks to the hard work of Appropriations and Budget Chairman Paul Sarlo and President Steve Sweeney, the State Senate voted to set up a system to allow this all to happen. The bill heads to the General Assembly next, and then on to Governor Phil Murphy, who has been a strong a vocal supporter of the plan from the start. I’m hopeful the New Jersey Tax Cut Plan will be law this spring.
Now, when we started developing this plan, most accountants we spoke to reacted the same way: they said that you can’t get a benefit for a charitable contribution. But we dug deeper, and presented them the findings that throngs of tax experts and scholars reviewed with us. The truth is, when it comes to states and municipalities, the IRS treats charitable contributions differently, and the courts have allowed it.
In fact, more than thirty states (most of them deep red) have been giving people tax credits for their charitable deductions for decades. Alabama and South Carolina, for example, use this structure for tuition tax credits. Why should they get it and not us? These programs are backed by years of precedent from the IRS, and even a Supreme Court ruling, to boot.
But just to be sure, we ran the idea by eight of the nation’s top tax law scholars, and their agreement was unanimous: the plan is sound. Not only is it supported by extensive legal precedent from 100 existing programs in 33 states, but the charitable tax concept itself, according to a paper they published in January, is based on a “correct and long-standing trans-substantive principle of federal tax law.”
In a meeting earlier this month, Congressman Leonard Lance and I also raised the issue directly with the Commissioner of the Internal Revenue Service. He confirmed what we already knew: The IRS hasn’t ruled on the New Jersey plan because they haven’t seen any specifics. In the unlikely event that the IRS decides to close the programs in all 33 states, Jersey towns should structure their programs to protect the taxpayers. But, the Commissioner seemed to understand that a well-designed program will be very hard to rule against without killing the program in those other states. They’re in a bit of a pickle on this one.
Like many of us, I’m sick and tired of New Jersey picking up the tab for what I affectionately call “Moocher States” like Mississippi and Alabama – states that pay far less in federal taxes than we do, and consistently get far more back.
The Moocher States knew what they were doing when they passed the Tax Hike Bill. They pilfered our pockets for $600 billion to pay for tax relief their states, not ours. 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.
Let me be clear: taxes in New Jersey are too high. But we don’t need the Moocher States to try to teach us a lesson. I’ll take advice from them when they stop taking our handouts and stop stealing our tax dollars. I’m fighting every day to cut wasteful spending and claw back more of our federal taxes to help lower our property taxes, and support cops on our streets, and fight crime and terror.
Businesses large and small have been putting the tax code to work to save money for decades. We should, too. That’s what the NJ Tax Cut legislation will do. And I’d say to the Moocher states – just remember: 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.
Josh Gottheimer is a U.S. Congressman from New Jersey’s Fifth District and Co-Chair of the bipartisan Problem Solvers Caucus.