ASSEMBLY RESOLUTION No. 269

STATE OF NEW JERSEY

219th LEGISLATURE

 

INTRODUCED JUNE 21, 2021

 


 

Sponsored by:

Assemblywoman  JOANN DOWNEY

District 11 (Monmouth)

Assemblywoman  VALERIE VAINIERI HUTTLE

District 37 (Bergen)

 

 

 

 

SYNOPSIS

     Petitions federal government to repeal state and local tax deduction cap as part of ongoing COVID-19 response efforts.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Assembly Resolution respectfully petitioning the federal government to repeal the state and local tax deduction cap as part of ongoing COVID-19 response efforts.

 

Whereas, Since the establishment of the federal income tax in 1913, American tax policy has followed several guiding principles, including the conviction that double taxation by the federal and state governments should be minimized and the belief that middle-class tax reductions stimulate economic activity; and

Whereas, Rooted in these principles, American taxpayers have been historically permitted to deduct from federal taxable income the balance of all state and local taxes paid during the federal tax year, including state income taxes and local property taxes, as well as state sales taxes in certain circumstances; and   

Whereas, Federal income taxpayers can realize this deduction, commonly known as the state and local tax (SALT) deduction, by itemizing their federal income tax return instead of claiming the standard deduction; and 

Whereas, In permitting the SALT deduction, the federal government acknowledged the longstanding principle that an individual should not be taxed on income that has already been paid in taxes to state and local governments; and

Whereas, However, in December 2017, the federal government enacted the “Tax Cuts and Jobs Act,” Pub.L. 115-97, which limited the amount of the SALT deduction to $10,000 for single filers, head of household filers, and married taxpayers filing jointly, and $5,000 for married taxpayers filing separately; and

Whereas, By limiting the amount of state and local taxes that may be deducted from federal taxable year, the “Tax Cuts and Jobs Act” now causes taxpayers residing in certain high-tax states, such as New Jersey, to experience a significantly larger federal tax burden; and

Whereas, Although critics claim that the unlimited SALT deduction only benefited the most affluent taxpayers, the deduction provided much-needed tax relief to middle-class taxpayers in this State, with roughly 40 percent of New Jersey taxpayers having claimed the deduction before the enactment of the “Tax Cuts and Jobs Act”; and

Whereas, Considering that New Jersey’s average property tax bill grew to approximately $9,100 in 2020, federal tax law now imposes a direct burden on many middle-class households throughout this State, whose local property tax and State income tax liabilities generally exceed the SALT deduction cap; and 

Whereas, The need to repeal the SALT deduction cap only intensified after the outbreak of the COVID-19 pandemic, which inflicted unprecedented harm on the health and prosperity of communities across this State; and

Whereas, New Jersey residents found themselves in the epicenter of the COVID-19 pandemic, as over 26,000 residents have been lost to the pandemic and many more continue to experience economic hardship; and

Whereas, Although the federal government has taken several steps to curb the devastating impacts of the pandemic, more action is needed to provide financial assistance to those communities most impacted by the pandemic; and

Whereas, The United States House of Representatives has already passed several COVID-19 relief packages, including the Heroes Act, H.R.6800, that would remove the SALT deduction cap and provide tax relief to struggling middle-class households; and

Whereas, By repealing the SALT deduction cap, the federal government would not only eliminate an unfair tax practice that disproportionately harms taxpayers residing in high-tax states, but also provide much-needed economic stimulus to tax-burdened middle-class households during a time of crisis; and 

Whereas, In light of this reality, it is altogether fitting and proper for the federal government to repeal the SALT deduction cap as part of its ongoing COVID-19 response efforts; now, therefore,

 

     Be It Resolved by the General Assembly of the State of New Jersey:

 

     1.    This House respectfully petitions the federal government to repeal the state and local tax deduction cap as part of its ongoing efforts to provide economic relief following the COVID-19 pandemic.

 

     2.    Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Clerk of the General Assembly to the President and Vice President of the United States, the Majority and Minority Leaders of the United States Senate, the Speaker and Minority Leader of the United States House of Representatives, and every member of the United States Congress elected from the State of New Jersey.

 

 

STATEMENT

 

     This resolution respectfully petitions the federal government to repeal the state and local tax deduction cap as part of its ongoing efforts to respond to the COVID-19 pandemic.

     Historically, federal law permitted taxpayers to deduct from federal taxable income the balance of all state and local taxes paid during the federal tax year, including state income taxes and local property taxes, as well as state sales taxes in certain circumstances.  Federal income taxpayers could realize this deduction, commonly known as the state and local tax (SALT) deduction, by itemizing their federal income tax return instead of claiming the standard deduction.  In permitting the SALT deduction, the federal government acknowledged the longstanding principle that an individual should not be taxed on income that has already been paid in taxes to state and local governments.

     However, in December 2017, the federal government enacted the “Tax Cuts and Jobs Act,” Pub.L. 115-97, which limited the amount of the SALT deduction to $10,000 for single filers, head of household filers, and married taxpayers filing jointly, and $5,000 for married taxpayers filing separately.  By limiting the amount of state and local taxes that may be deducted from federal taxable year, the “Tax Cuts and Jobs Act” now causes taxpayers residing in certain high-tax states, such as New Jersey, to experience a significantly larger federal tax burden.

     Although critics claim that the unlimited SALT deduction only benefited the most affluent taxpayers, the deduction provided much-needed tax relief to middle-class taxpayers in this State, with roughly 40 percent of New Jersey taxpayers having claimed the deduction before the enactment of the “Tax Cuts and Jobs Act.”  Considering that New Jersey’s average property tax bill grew to approximately $9,100 in 2020, federal tax law now imposes a direct burden on many middle-class households throughout this State, whose local property tax and State income tax liabilities generally exceed the SALT deduction cap.

     The need to repeal the SALT deduction cap only intensified after the outbreak of the COVID-19 pandemic, which inflicted unprecedented harm on the health and prosperity of communities across this State.  New Jersey residents found themselves in the epicenter of the COVID-19 pandemic, as over 26,000 residents have been lost to the pandemic and many more continue to experience economic hardship.  Although the federal government has taken several steps to curb the devastating impacts of the pandemic, more action is needed to provide to financial assistance those communities most impacted by the pandemic.

     The United States House of Representatives has already passed several COVID-19 relief packages, including the Heroes Act, H.R.6800, that would remove the SALT deduction cap and provide tax relief to struggling middle-class households.   By repealing the deduction cap, the federal government would not only eliminate an unfair tax practice that disproportionately harms taxpayers residing in high-tax states, but provide much-needed economic stimulus to tax-burdened middle-class households during a time of crisis.  In light of this reality, it is altogether fitting and proper for the federal government to repeal the SALT deduction cap as part of its ongoing COVID-19 response efforts.