NJ braces for possible repeal of SALT deduction

BY Michael Hill, Correspondent |

“You got to stand up for the middle class,” said Rep. Bill Pascrell. “We are at a crossroads right here between B.S. and reality.”

Pascrell was livid that President Trump has proposed and the House has voted to fast track the end of allowing homeowners to shave off their state and local taxes — the so-called SALT deduction — from their federal tax returns. Pascrell pointed out that Rep. Rodney Frelinghuysen was the only New Jerseyan to vote “yes.”

“[He did it] to save his seat. To save his chairmanship,” Pascrell said.

Frelinghuysen chairs the House Appropriations Committee. In a statement he explained, “I know how important existing deductions are to my constituents, including the state and local tax deduction, which is critical for New Jersey. I will carefully evaluate any potential changes to SALT, along with other deductions, before I vote on any tax reform legislation.”

Accountants say eliminating the SALT deduction would give the federal government more than $100 billion a year. On Friday, Pascrell, Rep. Josh Gottheimer and first responders gathered at the Paterson Fire Headquarters to say the elimination would harm police and fire departments.

“This is a horrible proposal,” said Passaic County Sheriff Richard Berdnik. “It’s going to put pressure on local government and their entities to cut the taxes, and of course ultimately cut services.”

“It will have a dire effect on our ability to continue to do the job that we do,” said Eddie Donnelly, president of the New Jersey Firefighters Mutual Benefit Association.

It will also have a personal effect on Donnelly, who pays $14,000 a year in Union County property taxes.

“I would really love to continue to bring my family up here in New Jersey, but this attack will make my life and my ability to do that here in New Jersey that much harder,” he said.

Across the street from headquarters, homeowner Lawrence Spagnola shared his thoughts on the prospect of losing a $9,000 deduction in property taxes.

“I think it’s a slap in the face. It’s taking money away from us,” said Spagnola.

CPA George Livanos with Sax LLP Tax Advisors broke down the potential impact given all that’s being proposed.

“It’ll have an impact predominantly on the higher income earners in the state of New Jersey. It will have an impact, to some extent, to the middle income earners and will have virtually no impact to the low-income earners,” said Livanos.

Gottheimer said New Jersey gets back 67 cents for every dollar it sends to the federal government and he has a bill addressing the imbalance of several southern states that collect three and four times what they send to Washington.

“This is just another huge wealth transfer payment from payer states like New Jersey and New York from our citizens to the ‘moocher states.’ We’re literally subsidizing other states,” said Gottheimer.

Pascrell said the nation didn’t learn its lessons from tax cuts of the early 2000s that led to hardship and agony of the financial crisis a few year later.

“Folks at the top got it, kept it and thumbed their noses at the rest of us,” said Pascrell.

The tax reform bill should be released next week.