Due to a $10,000 cap and a higher standard deduction, the percentage of middle-class households getting a federal break on their state and local levies will decline by 64 percent on their 2018 tax returns compared with 2017, according to a recent analysis by the Republican-led Joint Committee on Taxation.
While 23.8 million households earning between $75,000 and $200,000 took the deduction in 2017, the committee estimates the number will shrink to 8.7 million in 2018.
“The joint committee makes clear that the state and local tax deduction enjoyed by millions of Americans to help them pay their bills will be eliminated to give a windfall to a handful of the richest Americans,” said Rep. Bill Pascrell Jr., D-9th Dist., who helped lead the fight to protect the tax break as a member of the tax-writing House Ways and Means Committee.
“These numbers don’t lie,” he said.
In New Jersey, 41 percent of households claimed the state and local tax deduction, tied with Connecticut for second place behind Maryland, according to a report by the Pew Charitable Trusts.
The head of President Donald Trump‘s Council of Economic Advisers, Kevin Hassett, said the deduction unfairly favored some states over others.
“The economics of the idea is that by allowing it, the federal government puts its finger on the scale in favor of high-tax states,” Hassett said at a breakfast with reporters sponsored by the Christian Science Monitor.
“In some sense, the federal government was taking money from a resident in Mississippi and giving it to the residents of, say, Connecticut to compensate the Connecticut person for the fact that they had a potentially luxurious or inefficient government,” Hassett said.
Residents of Mississippi received $2.13 back from Washington for every $1 in federal taxes paid in 2015, second only to New Mexico, according to the State University of New York’s Rockefeller Institute of Government.
Connecticut residents got 82 cents back, fourth lowest behind New Jersey, New York and North Dakota.
Supporters of the tax bill, including Rep. Tom MacArthur, R-3rd Dist., have argued that the legislation’s lower rates and benefits like an enhanced child tax credit will more than make up for the diminished state and local tax break.
Indeed, 61.5 percent of Garden State taxpayers will see a tax cut under the law, according to a report by the Tax Policy Center, a joint venture of the progressive Urban Institute and Brookings Institution.
But that’s the fifth lowest among the 50 states, behind only Alaska, Florida, Georgia and New York, according to the research group, whose advisory board includes experts who formerly served in Democratic or Republican administrations.
And more than 1 in 10 New Jerseyans will see their taxes rise, more than any other state, the report said.
“Some Republicans bragged that the tax law was aimed at deliberately hurting the Northeast,” Pascrell said. “Here they were being truthful, as the GOP tax law will harm states like New Jersey whose residents have long relied on state and local tax deductions.”
The GOP tax law, passed along party lines under a procedure designed to exclude Democratic involvement, remains unpopular with a majority of Americans. A Gallup poll said 52 percent disapproved of the law, while 39 percent supported it. The survey of 1,015 U.S. adults was conducted April 2-11 with a margin of error of 4 percentage points.
In fact, the measure’s unpopularity in New Jersey made it more likely that Democrats could capture all five House seats now in Republican hands this fall, according to a recent Monmouth University Poll.
The chairman of the National Republican Congressional Committee disageed, saying that the tax bill is contributing to a growing economy, which will mean more jobs and higher wages.
“A growing economy doesn’t stop at the borders of a high-tax state,” said Rep. Steve Stivers, R-Ohio.
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