Trump Tax Plan ‘Draconian’ for New Jersey: State Official

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Gerald B. Silverman

President Donald Trump’s proposed elimination of state and local tax deductibility would be “exceptionally draconian” for New Jersey taxpayers, one-third of whom would pay an additional $3,500 per year, a Democratic assemblyman said.

Assemblyman John F. McKeon (D), chairman of the Assembly Judiciary Committee, sent a letter to the state’s congressional delegation April 28, urging them to oppose the Trump plan.

New Jersey is one of six high-tax (and mostly Democrat-leaning) states where residents would be particularly hurt by the elimination of the deduction for state and local taxes. Since the proposal was unveiled April 26, many states and cities, and advocacy groups, said they feel attacked by the White House’s plan. However, a staff member of a ranking Republican member of the House said it’s unlikely the deduction is in serious danger.

‘Exceptionally Draconian’

The average New Jersey taxpayer paid $18,367 in federal income taxes in 2015, McKeon said in the letter. That’s fourth among states, behind Connecticut ($22,785), New York ($19,782) and Massachusetts ($18,997), he said.

“These facts, combined with the reality that New Jersey makes the choice to primarily fund our schools with local property taxes, as opposed to states who use other sources, makes eliminating this federal tax deduction exceptionally draconian,” the letter said.

About 40 percent of New Jersey taxpayers itemized in 2014, according to McKeon. He said the average New Jersey taxpayer paid $8,549 in property taxes in 2016.

Trump’s tax proposal calls for an end to all itemized deductions for individual taxpayers, with the exception of mortgage interest and charitable contributions.

Rockefeller Institute

The Trump tax plan will have the most significant impact on state and local taxes since the 1986 tax reform enacted under President Ronald Reagan, according to an April 28 analysis from the Nelson A. Rockefeller Institute of Government.

The Institute, which is the research arm of the State University of New York, said elimination of the deduction for state and local taxes could “fuel a taxpayer revolt” at the state and local level, or it’s “possible that nothing would change and these taxpayers would simply face significantly higher costs.”

The analysis said states are in for “a wild ride” regardless of whether or not the Trump plan is enacted because taxpayers may alter their behavior in anticipation of the legislation. Moreover, the plan comes at a time when most states are finalizing their budgets for the next fiscal year.

The analysis also said the plan could put pressure on states to make changes in their own tax codes to conform with federal changes.

To contact the reporter on this story: Gerald B. Silverman in Albany, N.Y., at GSilverman@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

The letter is available at http://src.bna.com/okX.

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State