Congressman Bill Pascrell

Representing the 9th District of NEW JERSEY

Pascrell, Lance Lead Bipartisan Letter In Support of State and Local Tax Deduction

Jun 19, 2017
Press Release
Letter asks Treasury Secretary Mnuchin to preserve state and local tax deduction in tax reform plan

WASHINGTON, D.C. – U.S. Representative Bill Pascrell, Jr. (D-NJ), a member of the House Ways and Means Committee, and U.S. Representative Leonard Lance (R-NJ) led a bipartisan letter with 68 colleagues to Secretary of Treasury Steve Mnuchin protesting the Administration’s plan to eliminate the federal deduction for state and local taxes. The elimination of this deduction would be especially detrimental to high-tax states like New Jersey, California, New York, and Illinois.

"New Jersey residents pay the highest property taxes in the United States. Eliminating this deduction would increase taxes on the average New Jersey taxpayer by $3,500 per year," the members wrote in the letter. “We hope you will reconsider this dramatic increase to the tax burden borne to families and homeowners in select high-cost states.”

The letter goes on to state that “…our states are economic engines that deliver disproportionately more revenue to the federal government than they receive back, paying more for services delivered to the country at large. Faced with an already high tax burden and high cost of living, our communities cannot afford another increase to their taxes.”

The lawmakers are joined by groups such as the National Governors Association, United States Conference of Mayors, the National Association of Counties, and the National Conference of State Legislatures in opposing the elimination of the SALT deduction.

"We’re pleased to see bipartisan support for maintaining the state and local tax deduction in any comprehensive federal tax reform," said National Association of Counties Executive Director Matthew Chase. "These fundamental provisions trace back to President Lincoln and again to the original federal tax code for a simple reason: eliminating or capping federal deductibility for state and local property, sales and income taxes represents double taxation on our county residents, directly impacting more than 36 million middle class individuals and families."

Text of the letter below (link to PDF):

June 19, 2017

The Honorable Steven Mnuchin
Department of the Treasury
1500 Pennsylvania Ave
Washington, DC 20220

Dear Secretary Mnuchin,

While we welcome your efforts to streamline and modernize the Nation’s tax system, we were concerned to learn that your plan would eliminate the federal deduction for state and local taxes paid when taxpayers itemize their deductions each year.

Alexander Hamilton wrote in the Federalist Papers about his fear that the federal government might monopolize taxation to the “entire exclusion and destruction of state governments. ” Eliminating this deduction would single out and harm the highest-taxed states in the country, in particular California, New York, New Jersey, and Illinois.

New Jersey residents pay the highest property taxes in the United States. Eliminating this deduction would increase taxes on the average New Jersey taxpayer by $3,500 per year. More than four in ten New Jerseyans itemize – approximately 1.8 million people -- and the deduction was worth an average of 8.7 percent of their income. The deduction primarily benefits middle- and lower-income earners: nearly 85% of those claiming the state and local deduction in New Jersey have household incomes below $200,000 per year. Furthermore, states like New Jersey already disproportionately provide revenue to the federal government while receiving less than they give in return. According to the Tax Foundation, New Jersey ranked 41st in states by percentage of revenue coming from the federal government.

It is estimated that the value to New York City alone of taxpayers itemizing deductions for state and local taxes was $7.7 billion in 2014, or $6,600 per affected taxpayer, according to the Partnership for New York City. The state of New York sees 3.2 million residents claiming the deduction, and New York’s itemizers make up primarily lower- and middle-income households: 85% of those claiming the state and local deduction earned less than $200,000 in annual income. New York also sends a disproportionate amount of revenue to the federal government -- despite city residents paying $96 billion in personal income taxes, the city received back only about $61 billion from the federal government.

In California and Illinois, the state and local tax deduction also represents a sizable portion of taxpayers’ income, accounting for approximately 8% of the average itemizer’s adjusted gross income, and 6%, respectively.  In California, nearly 5.9 million residents claimed the deduction, with nearly 84% of those earning less than $200,000 in annual household income. In Illinois, the numbers were similar: 86% of the nearly 2 million Illinois residents claiming the deduction are households making less than $200,000 per year.

The elimination of this deduction unfairly penalizes residents in high-tax states like New York, California, Illinois, and New Jersey, where middle-class families can least afford another tax increase.

The National Governors Association, United States Conference of Mayors, and the National Conference of State Legislatures have spoken out against eliminating the state and local tax deduction.  The National Association of Realtors has also said eliminating the deduction, coupled with doubling the standard deduction, would “effectively nullify the current tax benefits of owning a home for the vast majority of tax filers.” 

We hope you will reconsider this dramatic increase to the tax burden borne to families and homeowners in select high-cost states. As outlined above, our states are economic engines that deliver disproportionately more revenue to the federal government than they receive back, paying more for services delivered to the country at large. Faced with an already high tax burden and high cost of living, our communities cannot afford another increase to their taxes.

We appreciate your consideration of our request.

Sincerely,

Bill Pascrell, Jr.                                                          

Leonard Lance

Frank Pallone, Jr.                                                       

Tom MacArthur

Frank A. LoBiondo                                                   

Rodney P. Frelinghuysen

Christopher H. Smith                                                 

Donald M. Payne, Jr.

Donald Norcross                                                        

Josh Gottheimer

Bonnie Watson Coleman                                           

Albio Sires

Brian Higgins                                                             

Joseph Crowley

Jerrold Nadler                                                            

Nydia M. Velazquez

Paul D. Tonko                                                            

Louise McIntosh Slaughter

Peter T. King                                                              

Claudia Tenney

Nita M. Lowey                                                          

Grace Meng

Sean Patrick Maloney                                                

Thomas R. Suozzi

Carolyn B. Maloney                                                   

Adriano Espaillat

José E. Serrano                                                           

Eliot L. Engel

Yvette D. Clarke                                                        

Gregory W. Meeks

Hakeem Jeffries                                                         

Mike Thompson

Linda T. Sanchez                                                       

Grace F. Napolitano

Julia Brownley                                                           

John Garamendi

Jared Huffman                                                                       

Anna G. Eshoo

Brad Sherman                                                            

Ro Khanna

Eric Swalwell                                                             

Adam B. Schiff

Pete Aguilar                                                               

Norma J. Torres

Ted Lieu                                                                     

Mark DeSaulnier

Zoe Lofgren                                                               

Jim Costa

Susan A. Davis                                                          

Jimmy Panetta

Tony Cardenas                                                           

Doris Matsui

Nanette Diaz Barragán                                              

Salud O. Carbajal

Ami Bera, M.D.                                                         

Judy Chu

Jerry McNerney                                                         

Mark Takano

Barbara Lee                                                                

Alan S. Lowenthal

Juan Vargas                                                                

Kathleen M. Rice

Danny K. Davis                                                         

Bill Foster

Raja Krishnamoorthi                                                  

Daniel W. Lipinski

Cheri Bustos                                                              

Robin L. Kelly

Bobby L. Rush                                                           

Luis V. Gutierrez

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