Op-Eds
Pascrell on the SALT Deduction: "A financial staple in the lives of many"
Washington, DC,
December 1, 2017
The state and local tax deduction is something which we as New Jerseyans rely on more than other states. And the elimination of this federal tax deduction would cause New Jerseyans great harm - harm that would then put the squeeze on municipal governments across the state. This deduction, the so-called SALT deduction, allows tax filers to write off their state and local property taxes and their state and local income taxes or general sales taxes, through itemization. This tax break provides much-needed relief to millions of middle- and working-class households, and it remains a financial staple in the lives of many New Jersey citizens because of our high property taxes. An attack on the SALT deduction is also an attack on middle- and working-class families. Eliminating it would further increase the tax burden on these families and individuals. Why has this deduction been under the microscope? Because many Republicans in Congress want to use the dividends to pay for tax cuts, particularly for businesses and others who do not necessarily need a tax break. According to the Tax Policy Center, 80 percent of the net tax cuts floated in Washington would go directly to the top 1 percent of Americans by 2027. Losing the SALT deduction could have a major impact on a household's ability to continue with their daily, weekly, and monthly expenditures. Throughout the nation, roughly thirty percent - or 44 million Americans - benefit from SALT deductions, and they could find themselves losing out if the deduction is repealed. In New Jersey, nearly 40 percent of filers use the SALT deduction. The loss of the tax deduction for state and local taxes would mean a loss of about $21,500 in write-offs for the average New Jersey taxpayer. Additionally, home values would drop by up to 15 percent in the Garden State. Homeowners who could no longer deduct the cost of their property taxes would be less likely to support local measures to fund new services or increase property taxes to pay for things like schools or infrastructure. In addition, repeal of SALT would increase the cost of credit to municipalities, making municipal bonds costlier and more difficult to use for necessary infrastructure projects. In addition to the personal cost, the SALT deduction is an asset to funding vital public services at the state and local level, such as police and fire departments. Repealing SALT would put pressure on states and municipalities to cut taxes or see many of their residents hit with a tax increase. And cutting taxes means less revenue for needed services — leading to cuts in local services. If SALT is eliminated, local governments will face challenges to finding the revenue necessary to fund K-12 programs, health programs, public safety, and basic infrastructure needs. Eliminating this deduction would likely pose a threat to the public safety of all New Jerseyans. The SALT deduction represents nearly 9 percent of New Jersey’s adjusted gross income. That means eliminating it would put pressure on the state, on counties, and on cities like my hometown of Paterson to either cut services or raise taxes to make up the difference. Imagine what a 9 percent cut would to our public safety departments and first responders. Fewer cops on the beat. Fewer firefighters to respond to emergencies. Lives would be put at risk. That's why the National Sheriffs' Association and Firefighters Union support retaining the SALT deduction. The National Governors Association, the United States Conference of Mayors, and the National Conference of State Legislatures have also come out in strong opposition to eliminating SALT deductions. Considering the widespread opposition to eliminating the SALT deduction, Republicans from affected districts are now reconsidering their party's stance. Moreover, the National Association of Realtors opposes eliminating the deduction, stating that the elimination would "effectively nullify the current tax benefits of owning a home for the vast majority of tax filers." Without being able to deduct the cost of property taxes, families may be discouraged from buying a new home, or may opt for a lower-cost option. In addition, losing this deduction will likely impact home prices, with Moody's predicting a 4 percent drop in home prices across the country, and even larger drop in higher-cost states. Our tax system is in dire need of modernization, and I'm ready to engage in serious discussion about ways we can do that. But this is the wrong direction. As a member of the Ways and Means Committee, I feel it has been my responsibility to let people know the significant harm this would cause to the residents of New Jersey. Losing this deduction would be disastrous for millions of our taxpayers and their communities, a scenario that would play out in local governments throughout the United States. We cannot merely shift the tax burden from the federal government to homeowners and municipalities who can least afford additional costs. |