In the Trump tax law is a provision that caps the state and local tax deduction, known as SALT, at $10,000. In a state where many people pay more than $10,000 in property taxes alone, that’s a significant change.
In May, Governor Murphy signed a bill that seeks to work around the SALT cap. Yesterday, the IRS shot that down.
Treasury Secretary Steve Mnuchin made the announcement.
Murphy today stood with Senate President Steve Sweeney and Assembly Speaker Craig Coughlin today to fire back.
“President Trump, Treasury Secretary Mnuchin, the IRS and the congressional Republican leadership showed that they hold New Jersey and our hardworking taxpayers in contempt. In President Trump’s view, New Jersey’s just an ATM to withdraw from to give money to the states which supported him. That’s not tax reform. That’s political payola,” Murphy said.
The bill Murphy signed allows municipalities to set up a charitable fund for people to pay taxes into.
Then they can take a charitable deduction up to 90 percent of that so-called donation. The IRS was expected the reject the idea, and it did.
“New Jersey residents should be respected and treated fairly. This is an attack on us as the governor said. We send far more than we get back. This isn’t fair and we’re going to fix this one way or another,” said Sweeney.
Earlier this year Attorney General Gurbir Grewal joined California and New York in suing the IRS.
He claimed the SALT cap is unconstitutional because it constitutes double taxation. A dozen high-tax states have enacted or are considering workarounds like New Jersey’s. The sting is felt particularly here.
“New Jersey will get the 5th least benefit among all 50 states from the President’s tax scam. More New Jerseyeans will see their taxes rise than in any other state in the nation,” Murphy said.
“I share the view of the senate president and of the governor. I’m certain of our congressional delegation, when we say this isn’t fair, it isn’t right — don’t pass the rule change. Do what’s best for the people of New Jersey,” said Coughlin.
The attorney general’s first assistant argued that 33 other states have similar charitable funds approved by the IRS, albeit for other purposes, mainly offsetting private school tuition.
“Murphy must stop wasting money on frivolous lawsuits engineered to garner national headlines by pitting himself against President Trump and start solving our statewide problems,” said state Republican Chairman, Doug Steinhardt in a statement Friday.
Whether it’s by legislation or judicial action, Murphy said, the state will fight to reverse this. With Congress in Republican hands — at least for now — the Democrats best recourse is probably through the courts.