President Donald Trump and House Republicans want to make it permanent.
The $10,000 cap — way below the average deduction of $17,850 for New Jerseyans taking advantage of the tax break — expires in 2025 along with the tax bill’s middle-class cuts, and the House GOP wants to make those provisions stick forever.
“They’re taking something that was bad and temporary and making it bad and permanent,” said Tom Bracken, president of the New Jersey Chamber of Commerce. “That’s going to penalize the citizens of the state and make the state less competitive and less affordable.”
House Ways and Means Committee Chairman Kevin Brady, R-Texas, said the cap covered most taxpayers who take the deduction.
The revenue gained by capping the tax break at $10,000 was used to “create middle class tax cuts, not just for Americans who itemize but for Americans who don’t as well. It’s part of making the code fairer and simpler,” Brady told reporters outside his committee office at the Capitol.
The proposal outraged Rep. Bill Pascrell, D-9th Dist., the only New Jersey lawmaker on the tax-writing Ways and Means panel.
“Another day, another attempt by congressional Republicans to stick it to the Garden State,” Pascrell said. “We’ve had it with this garbage. The GOP tax scam should be overturned and the full state and local tax deduction reinstated. Let the top 1 percent pay their fair share and leave New Jersey the hell alone.”
Most of the states hardest hit by the deduction cap, such as New Jersey, send billions of dollars more to Washington than they receive in services.
“The moocher states stuck it to us in December and the impact has been real on our families and businesses,” said Rep. Josh Gottheimer, D-5th Dist. “Now, the moochers are back at it, after they already raised our taxes and pushing housing prices down. The moochers are adding insult to injury.”
Brady said New Jersey and other high-tax states “are seeing a windfall in state revenue because of tax reform. Rather than pocket it in the state capitals, they ought to be passing it on to taxpayers, maybe these same taxpayers that are impacted.”
Gov. Phil Murphy‘s spokesman, Dan Bryan, responded this way: “Chairman Brady and congressional leadership made it clear how little they care about New Jerseyans when they voted to raise taxes on Garden State residents in order to pay for large tax cuts for corporations and the very wealthy.”
In addition to the state and local tax deduction cap, the state’s recent corporate tax increase also has added to the cost of doing business in New Jersey, Bracken said.
“When companies look at the tax environment here, which is already the highest in the country, and the fact that we increased the corporate business tax, it all adds up to being less competitive than we were before and we were struggling to be competitive before,” Bracken said.
Unlike with the original tax bill, congressional Republicans this time did not pass a budget resolution to prevent a Democratic-led filibuster in the Senate. That means any House-passed tax bill would need 60 votes to clear, and there are only 51 Senate Republicans.
“We’re getting a very strong positive response,” Brady said. “We’re going to continue to listen and fine tune it through August with the expectation of bringing it through the committee early in September.”
Trump has embraced the effort, signaling his support July 17 at a meeting with House Republicans. “We’re going to be putting in a bill,” he said.
Making the cuts permanent would add $650 billion to the federal deficit through 2027, according to the Committee for a Responsible Federal Budget, which supports reducing the flow of red ink. The original tax legislation will grow the deficit by $1.9 trillion over 10 years, according to the Congressional Budget Office.
Under the Republican tax bill that Trump signed into law last December, more than 1 in 10 New Jerseyans would see a tax increase, more than any other state, according to the Tax Policy Center.
At the same time, 61.5 percent of the state’s taxpayers would pay less, a smaller percentage than all but four other states, according to the research group, a joint venture of the progressive Urban Institute and Brookings Institution whose advisory board includes veterans of both Democratic and Republican administrations.
The tax bill capped a deduction claimed by 41 percent of households in New Jersey, tied with Connecticut for second place behind Maryland, according to a report by the Pew Charitable Trusts.
Because of the cap and the higher standard deduction, the number of middle-class households — those earning from $75,000 to $200,000 — taking advantage of the state and local tax break would drop 64 percent this year, to 8.7 million from 23.8 million, according to the Republican-led Joint Committee on Taxation.
The tax bill has remained unpopular: New Jerseyans disapproved of the legislation, 45 percent to 36 percent, in a Monmouth University Poll released in April.
Pascrell said making the cap permanent would “bedevil New Jerseyans for all time.”
“We already know Republicans go out of their way to bring pain on the people of the Northeast,” he said. “They said so themselves. But they keep trying to prove it again to us.”
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