New Jersey leaders considering asking Congress to restore unlimited SALT deductions

(The Center Square) – A New Jersey lawmaker wants Congress to consider restoring the unlimited state and local tax deduction (SALT), and the governor has come out in favor of removing a cap federal lawmakers previously put in place.

State Sen. Joe Pennacchio, R-Montville, has introduced Senate Resolution 111 to ask lawmakers in Washington to reinstate the deduction, which allows residents to deduct some state and local taxes from their federal taxes.

In December 2017, Congress capped the deduction at $10,000 as part of the Tax Cuts and Jobs Act. According to officials, New Jersey taxpayers deducted an average of $19,089 from their income taxes before the limit.

“The SALT deduction is vitally important to state residents,” Pennacchio said in a news release. “On principal, I oppose the cap for its impact on New Jersey taxpayers. It is effectively a tax on a tax. Those in the 30 percent tax bracket will have to earn an additional $130 to pay for every $100 in lost deduction under the cap. It’s time to right this wrong for state property taxpayers, and Congress can help level the playing field.”

In January 2020, Gov. Phil Murphy signed legislation aimed at giving small businesses a workaround. Earlier this month, at a news briefing with embattled New York Gov. Andrew Cuomo, Murphy spoke in support of repealing the cap, saying its passage was “completely based on politics.”

“The longer it stays on, the more people are going to get hurt,” Murphy said during the briefing. “… I believe it’s been an increment of $3 billion out of the pockets of our homeowners in the state. It’s high time we got this thing off the books.”

Pennacchio contends New Jersey is a “donor state,” sending more tax dollars to Washington than it receives.

“For every dollar paid by residents in federal taxes, New Jersey gets back no more than 79 cents,” Pennacchio said. “It’s the lowest return of any state in the nation, and it is an atrocious abuse of our hard-working, heavily taxed state residents.

“For those who live in high-tax states like ours, the cap is devastating,” Pennacchio said. “The deduction was established as an option to help offset heavy tax burdens. In New Jersey, with sky high property, income, and county taxes, the reinstatement of the full SALT adjustment is a necessity for residents struggling to remain in the state.”

The resolution has been referred to the state Senate Budget and Appropriations Committee.

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