Menendez: ‘If it’s Good Enough for Corporations, it’s Good Enough for Middle Class Families’

Menendez: ‘If it’s Good Enough for Corporations, it’s Good Enough for Middle Class Families’

Senator continues push for tax fairness for NJans who prepaid their 2018 property taxes in 2017


WASHINGTON, D.C. – U.S. Senator Bob Menendez, a senior member of the Senate Finance Committee that sets national tax policy, today kept the heat on Trump Administration officials for denying thousands of New Jerseyans, who frantically prepaid their 2018 property taxes before the end of the year from fully deducting them from their federal taxes, in defiance of federal law. 

Sen. Menendez pressed both Treasury Secretary Steve Mnuchin and Acting Internal Revenue Service (IRS) Commissioner David Kautter in two separate Finance hearings over the IRS’s unjust December 27, 2017 directive effectively limiting the ability of taxpayers to deduct 2018 property taxes paid in 2017, despite no prohibition under federal law.  The new tax law—passed in December but effective for the 2018 tax year—prohibits prepayment of state and local income taxes, but is silent on property taxes.

Sen. Fin. Comm.


Turning to the “trickle down” bonuses the Trump Administration claims are being given to workers, Sen. Menendez called out the hypocrisy of their policy which lets corporations deduct the full amount of bonuses in 2017 regardless of whether or not they were paid in 2017, while simultaneously denying taxpayers the ability to deduct property taxes they actually paid.  (Starts at 3:40)

“By deducting in 2017, corporations—to use your words Mr. Secretary—can ‘game the system’ and claim an even larger deduction in 2017 without spending a dime,” said Sen. Menendez.  “But in contrast, a middle-class family that actually paid their property taxes in 2017 won’t be able to deduct them in the year that they paid, which to me is blatant hypocrisy, and would be shocking if it didn’t so neatly fit into the pattern of an administration that puts corporations on Wall Street above the people who live on Main Street.”

Secretary Mnuchin was insistent during his testimony that the IRS guidance was consistent with existing law prior to the new bill passing, though could not cite any specific law.

“Why would Section 11042 of the Trump Corporate Tax Bill specifically prohibit the deductibility of prepaid state income taxes?  Why would the bill prohibit something that was already disallowed?  That’s simply illogical,” Sen. Menendez pointed out.  “In the law, can you point to me the section of the law that specifically prohibits the deduction of prepaid property taxes?”

“No, not in the bill, but in the IRS actual code,” Secretary Mnuchin responded.

“Prior law doesn’t prohibit the deduction of prepaid property taxes, prior law,” Sen. Menendez continued.  “The Trump Corporate Tax Bill doesn’t prohibit the deduction of prepaid property taxes.  Therefore, the property taxes should be deductible under the law.”

The Trump Corporate Tax Law caps state and local tax (SALT) deductions at $10,000, which could result in double-taxing up to 1.8 million, or 40 percent of New Jersey taxpayers.  In an attempt to alleviate this painful impact on their pocketbooks, many New Jerseyans, who had claimed a combined $32 billion in annual SALT deductions, frantically prepaid their 2018 property taxes in the final days of December 2017 – many standing in lines for hours. 

Sen. Menendez, a senior member of the Senate Banking Committee, grilled Secretary Mnuchin during a Banking Committee hearing last month, in which the secretary said the IRS advisory was issued to prevent taxpayers from “abusing the system.”

“I’m offended by that accusation,” Sen. Menendez told Secretary Mnuchin during today’s hearing.  “The people of New Jersey work hard, they pay far more than our fair share of taxes, they pay way above their weight economically.  We aren’t just a blue state, we are a blue chip state that drives innovation and dynamism.  So, we’re not abusing the system.  In our view, the system is abusing us.”

Earlier this year, Sen. Menendez led a New Jersey Congressional delegation letter demanding the Internal Revenue Service (IRS) rescind their directive that would prohibit New Jersey residents from deducting their prepaid 2018 property taxes from their 2017 federal taxes.  The letter was signed by U.S. Senator Cory Booker and Reps. Donald Norcross (N.J.-01), Josh Gottheimer (N.J.-05), Frank Pallone, Jr. (N.J.-06), Albio Sires (N.J.-08), Bill Pascrell, Jr. (N.J.-09), Donald Payne, Jr. (N.J.-10) and Bonnie Watson Coleman (N.J.-12).

Sen. Menendez introduced an amendment to preserve full SALT deductions in December during Senate debate on the Trump tax plan, but Republicans struck it down on a strictly party-line vote.