Menendez, Booker, Colleagues Unveil New Legislation to Restore Homeowners’ Ability to Work Around GOP Cap of SALT Deduction

Menendez, Booker, Colleagues Unveil New Legislation to Restore Homeowners’ Ability to Work Around GOP Cap of SALT Deduction

U.S. Senators Bob Menendez, a senior member of the tax-writing Senate Finance Committee, and Cory Booker today joined several of their colleagues in introducing a Congressional Review Act (CRA) Resolution of Disapproval to nullify the recent IRS decision blocking states’ ability to work around the harmful SALT deduction caps and will allow homeowners to fully retain their deduction. While the Treasury Department blocked states' workarounds for families, the department in September 2018 issued guidance that allowed businesses to continue to benefit from these same workarounds.

“Trump’s tax law was a massive hit job on middle class taxpayers in New Jersey and other economic powerhouse states where the cost of living is high, and we are going to keep fighting with every tool we’ve got,” said Sen. Menendez. “This CRA will reverse the flawed guidance issued by the IRS last month, which crippled state level efforts to protect middle class families from even higher property tax burdens. Our action today is our latest effort to stop this President from weaponizing the tax code against blue states like New Jersey, and I will keep fighting for other legislative solutions, like my own legislation the SALT Act, to fully reinstate the property tax deduction so vital to supporting education, public safety and other job-creating investments in our communities.”

“The disastrous Trump tax cuts gave handouts to wealthy corporations and those who needed it the least on the backs of hardworking New Jerseyans & Americans,” said Sen. Booker. “Instead of building a fairer tax code for all Americans, the Administration is using the IRS as a political tool to block relief for families in our state and across the country. New Jerseyans deserve better.”

Rammed through the Republican-controlled Congress on a party-line vote in December 2017, the Trump Tax Law gave huge tax breaks to the super rich and giant corporations, while hiking taxes on the middle class and capping SALT at $10,000.

The SALT deduction allows taxpayers to write-off taxes paid at the state and local level from their federal income tax bill so they won’t be subject to being taxed twice on the same dollar.  In addition to helping families avoid double taxation, the SALT deduction supports the ability of communities, cities, and states to raise their own revenues and fund critical investments in public education, infrastructure, social services, and public safety.

In 2017, about 30% of taxpayers claimed the deduction, and more than 80% of those filers earned under $200,000—middle class in high cost-of-living states.  In New Jersey, 1.8 million or 40% of taxpayers deducted their local property and state income taxes in 2016, the last year the data is available, averaging $18,000 per deduction.

According to a recent survey by the New Jersey Society of Certified Public Accountants (NJCPA) of more than 300 CPAs in the state, more than 63% said their individual and family clients earning less than $200,000 will see their federal tax bill rise as a result of the SALT cap.  Nearly 70% said the SALT cap would definitely or somewhat influence their advice to clients on whether to leave New Jersey.

Sens. Chuck Schumer (D-N.Y.), Ron Wyden (D-Ore.), Patty Murray (D-Wash.), Dick Durbin (D-Ill.), Jeff Merkley (D-Ore.), Kirsten Gillibrand (D-N.Y.), Richard Blumenthal (D-Conn.), Chris Murphy (D-Conn.) and Chris Van Hollen (D-Md.) also cosponsored the legislation.

Sen. Menendez has been an outspoken critic of the Trump Tax Bill that eliminated the SALT deduction.

Earlier this year, Sen. Menendez and Congressman Bill Pascrell, Jr. (N.J.-09) introduced the bicameral and bipartisan Stop Attacking Local Taxpayers (SALT) Act of 2019, which would fully restore the SALT deduction, which has been part of the tax code since the federal income tax was created in 1913. It also restores the top individual income tax rate at 39.6%, the rate at which upper income was taxed prior to passage of the Trump Tax Law.

Sen. Menendez blasted the Trump Administration’s use of the federal tax code to unjustly target New Jersey before voting against the President’s nominee for chief counsel of the Internal Revenue Service (IRS), Michael Desmond.

Last October, Sens. Menendez and Booker called on Trump IRS Commissioner Charles Retting to withdraw the Administration’s proposed regulations that would raise the property tax burden on hundreds of thousands of New Jersey families, calling the decision “politically motivated.” Sen. Menendez spoke out against the confirmation of Rettig as IRS commissioner both on the Senate Floor and in letters.

The Senator also grilled Mr. Rettig, about the Trump Administration’s repeated efforts to increase the property tax burden on middle-class New Jerseyans and warned him about using the IRS as a political weapon before voting against him in the Senate Finance Committee.

Sen. Menendez led the New Jersey Congressional delegation’s initial response to the announcement by the IRS and called it, “One giant hit job of New Jersey’s middle class.”  Sens. Menendez and Booker stood with middle class homeowners in Bloomfield, N.J., to highlight how the bill was a direct attack on New Jersey, and after two different versions passed the House and Senate, Menendez was named by Senate Democrats to the Tax Conference Committee to defend deductions essential to New Jerseyans.  Unfortunately, the Republican legislation passed the Senate despite Menendez’s objections, and was signed by President Trump. 

###