Democratic leaders say property owners are giving them an earful, complaining the Trump tax law that put a $10,000 cap on the so-called SALT deduction is hurting their tax returns.
“I think everybody expected this to be a tax cut, and then when we call them up and tell them they owe more, they’re surprised because it was sold as a tax cut. It’s not a good message to have to give to your clients,” said Ann Callari, CPA and partner at RotenbergMeril.
On Monday, federal lawmakers unveiled a bipartisan bill to fully restore the state and local tax deduction, aptly naming the act SALT.
“Which stands for Stop Attacking Local Taxpayers,” Sen. Bob Menendez said.
At a CPA firm in Bergen County, congressional leaders outlined benefits to the restoration using the earnings of a single mom making $100,000 a year, paying $14,000 in property taxes. Lawmakers say restoring SALT would save about $1,500 on her federal tax return. The bill offsets the cost by restoring the top tax rate to 39.6 percent, the level of top earners prior to the GOP reform.
“In 2016, 1.8 million, or around 40 percent of New Jersey taxpayers deducted their property and state income taxes, averaging $18,000 per deduction,” Menendez said.
“It is the oldest deduction in the United States of America. This deduction came out of the Civil War. This is what they have done to us. This was not invented in 1924 or 1925. This came out of the Civil War,” said Rep. Bill Pascrell.
But analysts with the nonpartisan Institute on Taxation and Economic Policy say it’s inaccurate to isolate the SALT deduction. In reality, the average taxpayer in New Jersey will pay less. On balance, New Jersey will pay $8.1 billion less in federal taxes due to the GOP reform. Their figures show 82 percent of taxpayers will get a cut and just 10 percent will see a hike.
Still, lawmakers insist middle class households are bearing the brunt and say they’ll use GOP legislators’ desire to clean up the bill as leverage to pass the restoration.
“I think there are a lot of Republicans in the Congress who believe that this needs to be addressed, and the fact that the president talked about it means that there’s a real possibility here of doing something on a bipartisan basis,” said Rep. Frank Pallone.
Lawmakers are moving quickly, heading straight to Washington to introduce the legislation, though the timeline to move it through is expected to take quite a bit longer.