By Harold Kane
Did President Donald Trump inadvertently give the New Jersey Republicans a gift horse?
It’s no secret that the cap of $10,000 on the deduction for state and local taxes (SALT) will hit some Garden State residents hard. Many residents of the Hudson County Gold Coast are paying $20,000 to $30,000 in property taxes plus New Jersey income and sales taxes, and New York City and state income taxes. These residents are used to taking the full SALT deduction from their federal taxes and often receive a tax refund from the Treasury. Now there is a high probability that these people will be sending a check to the Treasury instead of receiving one. Some will blame the president for the additional tax liability, but the national tax laws have to be applied equally. Where the changes hurt New Jersey they actually help Texas since Texas has much lower property taxes and no state income tax.
So why is this a gift horse?
The taxes that New Jersey residents can no longer deduct are levied by the Governor and state legislature. Not one penny of the individual property tax goes to Washington. The property tax payment goes to your local mayor to be divided among the municipality, the Board of Education, County and the library and fire districts if you have them. Since New Jersey levies some of the highest local taxes in the nation it is now up to New Jersey to fix the problem that it (New Jersey) caused. The 2019 Assembly election would be a good place to start the needed correction.
The Republicans could make a new tax structure pledge to the voters starting with the 2019 Assembly election. The new structure must be easy to understand and easy to implement. The tax structure that will easily fit this bill is California’s Proposition 13 from 1978.
Prop. 13 reduced the California property taxes from whatever an assessor thought a property was worth to 1% of the most recent sale price. A World War II veteran who bought his home for $10,000 in 1948, and was in 1978 paying $2,000 in property taxes, saw his tax bill reduced to $100.00. A person purchasing a home in 2018 for $500,000 will be presented with a tax bill of $5,000. This method of taxing property meets the test of ad valorem. It’s simple, easy to understand and easy to implement.
One proponent of this plan might be Jersey City mayor Steven Fulop who saw his property tax bill increase from $8,112 to $13,238 with the recent revaluation. With a Prop. 13 his taxes would be reduced to $8,450 on the house that he paid $845,000 for.*
The Republicans in New Jersey need an issue to energize their base and then the electorate. Since property taxes are always an issue, a New Jersey Prop. 13 can solve that issue. A New Jersey ballot initiative in 2022 will solve the issue here, but in order for the issue to be put before the voters in 2022 (our state doesn’t have a popular ‘initiative and referendum’ process like California), the Republicans must win back the Assembly in 2019, re-elect the Assembly, and elect the Senate and Governor in 2021.
President Trump opened the door on the property tax issue with the SALT cap. Do the New Jersey Republicans have what it takes to close that door?
*Source: Gannett DataUniverse & NJ Parcels