Creating loopholes Will Not Help Taxpayers
By Katie Cericola
The response by high taxed states to the federal tax reform signed last month by President Trump, has been – to say the least – interesting. By that I mean it has been disappointing, curious, ineffective and even humorous.
One of the initial responses coming from New York Gov. Andrew Cuomo was to sue the federal government for limiting the tax write off for state property and income taxes on your federal tax filing. New Jersey Governor-Elect Phil Murphy says he likes the idea and will consider wasting taxpayer dollars suing Congress because New Jersey, like New York, can’t control its spending.
The response from Officeholders in high taxed states who are incapable or unwilling to lower the tax burden on middle class families is to blame someone else for their habitual spending; sort of like an alcoholic suing Budweiser for making beer.
While that temper tantrum (let’s sue them) response is percolating, some Democrats are showing unusual creativity. Rep. Josh Gottheimer, a Democrat from Bergen County and former Clinton speech writer has come up with a plan to help homeowners suffering the highest property taxes in nation by allowing towns and cities to establish charitable funds, which homeowners could contribute to in exchange for tax credits applied toward their property-tax bills. Perhaps Mr. Gottheimer will suggest bringing in some people from the Clinton Foundation to administer the charity.
Ironically, the charity plan is catching fire in some media circles – but some sober reasoning will douse the flames quickly.
Even if we are told to ignore the absurdity of having municipalities and counties create and administer dubious charities — and the costs to run them — the plan is not likely to pass IRS muster. While charitable deductions are deductible, the amount of the donation is offset by the value received
For example, if you donate $100 to the Boys & Girls Club dinner and the dinner is worth $25, your donation is computed as $75.
Now let’s apply that rule to the plan to replace property taxes and state income taxes with a charitable donation to cover the cost of services. If a homeowner “donates” $15,000 to offset his or her property and income taxes in hopes of receiving a sizable tax write off – local governments would have to admit that the value of the $15,000 “donation” is pretty close to zero. In other words, for the deduction scheme to work the people taxing us would have to tell us that the money we are spending for road repair, policing, education, county government services far exceeds its actual value. Most of us already know that we are being severely overtaxed, but to have official confirmation of that fact would be — well — interesting. More than that, it would be revolutionary — as in spawning a badly needed tax revolt in high tax states such as New Jersey.
It seems that the leaders in high taxed states will try any gimmick they can to avoid dealing with the sobering reality that they are overtaxing people. The only way to deal with that fact is to reduce spending and cut taxes.
Federal tax reform should be the impetus for cutting spending not hiring lawyers to sue the federal government or creating dubious, fanciful tax loopholes. How about our leaders try this idea — shrink the government’s fiscal footprint. Stop doling out excessive health care plans and pension benefits to public workers; stop creating new social programs and quit inventing new ways to spend other people’s money.
There is hope. According to an Associated Press report, Republican governors in Maryland and Michigan have said they will introduce tax cuts to compensate for the limit on SALT write offs.
“Protecting taxpayers should be a bipartisan issue,” Maryland’s Larry Hogan, a Republican, said last month.
Cuomo, Murphy and other high tax advocates should pay attention to Gov. Hogan. He gets it!