fbpx

Opinion: Cap on SALT deduction should lead to property tax reform

By Harold V. Kane

Harold V. Kane

Did President Donald Trump inadvertently give the New Jersey Republicans a gift horse? It is no secret that the cap of $10,000 on the deduction for state and local taxes (SALT) will hit many 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.   https://en.wikipedia.org/wiki/1978_California_Proposition_13

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 referendum in 2022 will solve the issue here, but in order for the issue to be put before the voters in 2022, 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?

Harold V. Kane is is a Navy veteran of the Vietnam War and a Rutgers alumnus. He is the treasurer of the Middlesex County Republican Organization.

 

More from my site

Posted: December 17th, 2018 | Author: | Filed under: Harold Kane, Harold V. Kane, New Jersey, Opinion, Property Taxes | Tags: , , , , , | 4 Comments »

4 Comments on “Opinion: Cap on SALT deduction should lead to property tax reform”

  1. The Question Is said at 9:59 am on December 17th, 2018:

    Will NJ Republicans Actually Listen To This Sage Advice?

  2. Mike Harmon said at 1:22 pm on December 17th, 2018:

    Good article and I would just add. NJ and many blue states took the opportunity of federal tax cuts under Bush to raise state income taxes. Property prices and associated property taxes have made huge swaths of NJ unaffordable for the next generation with college loans. The salt cap should drive those selling prices down. Finally, I think if JC Mayor Fulup lived in Middletown he would quickly change affiliation to R. Yet JC didn’t revalue for nearly 30 years. The consequences of that revaluation (which was at least partly engineered by greedy developers who wanted more land) put lots of grannies unfairly out of their houses in the Grove Street and Exchange Place ares. Mr. Kane’s plan would fix that. Ful0p got caught paying property tax peanuts on a house he paid $850K and the rest of Hudson County started to realize how the county was subsidizing JC for decades. Houses are the fortress for families and the rocks of neighborhoods and should not be taxes at volatile rates like the stock market which prices every share at the value of the last sale. Guess what? An increase in sales volume will drive down sales prices.

  3. Dosriveras said at 6:13 pm on December 17th, 2018:

    Is this realistic? Recent electoral results would suggest that rather than being primed to change the party balance in state legislatures, voters took and will continue to take revenge on the Republicans who put the SALT restrictions into place.

    In New Jersey, the 115th Congressional Delegation had 7 Democrats and 5 Republicans. The 116th will have 11 Democrats and 1 lonely Republican (Hi Chris!).

    Look at other high local tax states: New York (net Republican loss 3 seats), Pennsylvania (net Republican loss 4 seats), California (net Republican loss 7 seats).

    The true tax rebels vote with their feet. I did.

  4. Gotta love NJ, said at 6:29 am on December 18th, 2018:

    forget the big picture, punish that President who wasn’t on the ballot, vote for the party that largely gave you the highest taxes, in the first place.( so they get affirmation that we like paying more.) We sure showed that Chris Christie by stomping out Kim Guadagno, didn’t we? Now we have the East coast’s answer to “looney Brown” on the Left.. have said for years: our state motto used to be “ “Liberty and Prosperity:” now, it’s: “ I’m from NJ- please, tax me some more!” ( just kind of hard to fit it on our state flag.) So, they will..