New Jersey and New York governors refuse to let up in their assault against the new federal law that caps the deduction for state and local taxes.
New Jersey Gov. Phil Murphy (D) February 8 called on state lawmakers to send him a bill that would allow taxpayers to pay property taxes as charitable contributions to circumvent the new $10,000 cap on the federal deduction for state and local taxes.
While addressing the New Jersey Conference of Mayors, Murphy said that “bringing this concept to New Jersey’s new reality would have a tremendous and immediate benefit for our taxpayers.”
The governor said the plan would allow taxpayers to make charitable contributions to local governments that would fully offset their property tax liability.
“Shifting property tax payments to a charitable contribution system would not only preserve your local revenues, it also provides residents with significant deductibility in their federal income taxes,” Murphy said.
Murphy said 33 states have systems in place, “blessed in each case by the IRS,” that allow taxpayers to make charitable contributions for a dollar-for-dollar tax reduction. South Carolina, for instance, offers a dollar-for-dollar tax credit for donations made for private school tuition.
Lawmakers in other states with high tax burdens, such as California and Connecticut, are considering similar SALT deduction workarounds.
The fiscal 2019 budget proposal released February 6 by Connecticut Gov. Dan Malloy (D) would allow residents to make charitable contributions to local governments in lieu of paying property taxes, in addition to other changes.
Another idea being considered by New York Gov. Andrew Cuomo (D) would shift the state income tax to an employer-side payroll tax.
The same day Murphy urged lawmakers to support his workaround plan, Cuomo announced public outreach campaign called the “Tax Fairness for New York Campaign” designed to combat the federal tax law.
Cuomo in a February 8 news release said the campaign is part of a “three-pronged effort to fight the federal tax assault on New York.” The effort also includes a multistate legal challenge of the new cap on the SALT deduction. Cuomo said Maryland will join New York, Connecticut, and New Jersey.
Policy groups, meanwhile, have argued against implementing these proposals.
New Jersey Policy Perspective in a January report said lawmakers should consider restructuring their state tax codes in other ways to mitigate the impact of the new federal tax law on low- and middle-income residents, because the workarounds under consideration "would disproportionately benefit the wealthiest households."