Menendez Rails Against IRS Nominee as a Danger to States like NJ
Menendez Rails Against IRS Nominee as a Danger to States like NJ
Menendez has been fighting to protect NJ middleclass homeowners from Trump property tax increase
WASHINGTON, D.C. – Today, U.S. Senator Bob Menendez, senior member of the Senate Finance Committee that sets national tax policy, spoke out again against Charles Rettig, Trump’s nominee for IRS Commissioner.
“During his time before the Senate Finance Committee, Mr. Rettig gave me no indication that he would protect New Jerseyans facing the threat of double taxation under the tax bill passed by this Congress and signed into law by President Trump late last year,” Sen. Menendez said. “Nor did Mr. Rettig express any respect for the rights of states to administer their own constitutionally-upheld charitable contribution tax credit programs. Instead, Mr. Rettig left me all but certain that he would be a rubber stamp for this Administration’s politically-motivated tax policies and allow a backdoor tax increase on countless middle class families.”
“Taxpayers in New Jersey and across the nation deserve better than tax policies that knock the knees out from under them and an IRS commissioner who kicks them while they’re down,” Sen. Menendez added. “He won’t protect New Jersey’s middle class from higher property tax bills. He won’t respect perfectly legal state-based programs that offer tax credits in return for contributions to nonprofits that do critical work in their communities. He’ll be nothing more than a Republican rubber stamp for President Trump’s politically motivated tax policies.”
At his nomination hearing, Sen. Menendez 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. Menendez also led colleagues in calling on Mr. Rettig to make clear he will treat all taxpayers equally, regardless of the political leanings of the state in which they live.
Sen. Menendez is the author of legislation in the U.S. Senate to fully restore the State and Local Tax Deduction (SALT) and led the New Jersey Congressional delegation’s response to the IRS announcement that it will effectively block New Jersey’s efforts to protect taxpayers from the Trump Tax Law’s $10,000 cap on SALT deductions, resulting in the double-taxing of up to 1.8 million, or 40 percent of New Jersey taxpayers.
When the Trump tax plan was first introduced, Sen. Menendez called it, “One giant hit job of New Jersey’s middle class.” The senator stood with middle class homeowners in Bloomfield, N.J., to highlight how the bill was a direct attack on New Jersey.
Senator Menendez’s remarks as prepared for delivery:
I rise today to oppose President Trump’s nominee for Commissioner of the IRS, Mr. Charles Rettig. Now more than ever, the American people need government officials who are willing to stand up and speak truth to power. Unfortunately, Mr. Rettig failed to convince me that he’s up for the job.
During his time before the Senate Finance Committee, Mr. Rettig gave me no indication that he would protect New Jerseyans facing the threat of double taxation under the tax bill passed by this Congress and signed into law by President Trump late last year. Nor did Mr. Rettig express any respect for the rights of states to administer their own constitutionally-upheld charitable contribution tax credit programs. Instead, Mr. Rettig left me all but certain that he would be a rubber stamp for this Administration’s politically-motivated tax policies and allow a backdoor tax increase on countless middle class families.
At a time when we need independence and impartiality at the IRS, that’s absolutely unacceptable. As we speak, the Treasury Department and IRS are trying to make sense of the deficit-exploding corporate tax cuts rushed through Congress by the Republican Majority last December – tax cuts that according to the Congressional Budget Office will drive us toward trillion-dollar annual deficits by 2020 and, by undermining the Affordable Care Act, eventually strip 13 million Americans of their health care coverage.
As the IRS attempts to implement these misguided policies, corporations are pulling every string to rig the tax code in their favor. Apparently, it wasn’t enough for them to get a massive a trillion dollar tax windfall from President Trump. So now, they’re amassing armies of accountants and legions of lobbyists to get even more out of the IRS. That’s why drug companies are rushing to reclassify their cash stocked overseas as assets so they can pay a fraction of what they’d otherwise owe. That’s why oil companies are drilling into the law to find new loopholes in the way that we tax foreign profits. CEOs want no stone left unturned, no loophole left unopened.
But there’s one group that’s not getting any special access or sweetheart deal – and that’s middle class families in my home state of New Jersey. I’ve said before and I’ll say it again. The Trump tax bill was one giant hit job on New Jersey’s middle class, and states similarly situated. You would think with $1.5 trillion, Republicans could have cut taxes for everybody, and yet under the Trump tax plan, 40 percent of New Jersey taxpayers will either face an average tax increase of $2,100 – or get no tax cut at all. That’s because Republicans gutted the state and local tax deduction – which 1.8 million homeowners across my state alone depend on to avoid being taxed twice on the same money.
These people aren’t high-rollers. They weren’t born into multimillion dollar trust funds. These are middle class families who work hard for everything they have. As you can see, 83 percent of New Jerseyans who deduct their property taxes make under $200,000 year, and nationwide, half of all taxpayers who claim these deductions make under $100,000. In New Jersey, the average deduction totals about $18,000 per filer – far above the arbitrary cap imposed by Donald Trump and this corporate-sponsored Republican Congress, and it means the average New Jersey taxpayer who itemizes their returns could lose $8,000 in deductions this year alone.
Even the President’s own top economic advisor agrees. According to Larry Kudlow, “When you end the state and local deduction, because rates are still relatively high, you are going to hurt a lot of different people. So the internal logic was not good… this is not a true tax reform bill.” Only in Washington could Republicans borrow two trillion dollars from China to cut taxes for big corporations and still need to hike taxes on New Jersey families to pay for it, but that’s exactly what Republicans did by capping the state and local tax deduction and hitting our middle class with an even higher property tax burden.
But we New Jerseyans aren’t known for being pushovers. That’s why last December, several mayors across our state allowed homeowners to prepay their 2018 property taxes before Trump’s harmful policies took effect in January. And that’s why back in May I proudly joined Governor Phil Murphy as he signed a new law to shield homeowners from higher property tax burdens. Under this program, homeowners who contribute to state-approved charities may receive a property tax credit worth up to 85 percent of those donations.
Now, New Jersey didn’t reinvent the wheel with this new law. It was modeled after existing tax credit programs on the books in at least 32 other states that offer tax credits to residents who contribute to certain charities. In our case, we’re not only shielding families from higher property tax bills, but making sure New Jersey has the resources needed to keep cops on the beat, firefighters on the job, and New Jersey schools on the cutting-edge.
The IRS has consistently respected these programs. Back in 2011, the IRS Chief Counsel released an advisory memo clarifying that state tax credits do not, I repeat, do not prohibit taxpayers from writing off the full value of their charitable donations from their federal taxes. In other words, getting a tax credit doesn’t mean you made more money and thus, you shouldn’t be taxed more as a result. But it’s not just the IRS that upheld these programs. This issue has gone before the Supreme Court, and the Supreme Court ruled that these state tax credits are not considered things of value, but rather amount to “the government declin[ing] to impose a tax.”
So, to review, the IRS never had a problem with the 32 other states who had charitable deduction tax credit programs on the books. The IRS never had a problem, that is, until New Jersey decided to create one. As soon as New Jersey established this perfectly legal tax credit program – the IRS suddenly decided to reverse course. All of a sudden, they’re willing to go to court over this and challenge this well-established precedent. Apparently, the Trump Administration is so intent on sticking it to New Jersey that they’re willing to jeopardize all of these longstanding programs in all of these other states.
Let me give you a few examples of the programs endangered if Mr. Rettig fails to stand up for the rights of states. In Alabama, there’s a program that offers families a 100 percent tax credit for contributing to private school scholarship funds. In Missouri, there are several very worthy programs that offer tax credits for contributions – one for shelters for domestic abuse survivors and another for donations to campuses focused on the STEM fields. There are tax credits for donating to state colleges in Indiana, and water conservation in Colorado, and public road construction in Arkansas. There are similar programs in Missouri, Kansas and Georgia. I could go on and on, but here’s the bottom line. At least 30 state tax credits programs are now in jeopardy because the Trump Administration changed the rules in the middle of the game.
You know, I’ve heard a lot of lip service from Republicans about states’ rights over the years. They’re all about states’ rights – until it comes to New Jersey’s rights. Some say President Trump and the Republican Congress capped the property tax deduction because they have it out for the so-called blue states, but at the end of the day, the states most affected by this foolish policy aren’t red states or blue states. They’re America’s blue-chip states, America’s innovation states, America’s economic powerhouse states.
New Jersey didn’t become an economic powerhouse by accident. Our success wasn’t born overnight. It’s the result of the priorities we set and the investments we make.
Take it from Kathryn, a constituent from New Jersey. She wrote me to say, “My husband and I pay nearly $13,000 a year in property taxes to the town of Oradell. For this, we receive excellent services and have reputable public schools. I pay taxes to the state of NJ which support our infrastructure, other cities, and necessary programs…I am fine paying what I already pay. That being said, I feel very strongly that it unacceptable to be taxed on taxes that I already pay.”
Kathryn’s right. It’s no coincidence that New Jersey claims more in state and local tax deductions than nearly every other state in the nation, and also has some of the best schools in the nation. We pay for them! And yet, with the Trump tax scam, Republicans want us to pay for them twice!
The federal income tax system has historically allowed taxpayers to deduct the taxes they pay at the local level from their federal returns, and for good reason. States that invest in education, infrastructure, and opportunity for all have higher per capita incomes, enjoy more prosperity, and rely less on federal handouts. These investments help make New Jersey a great place to live, work, and raise a family, and you don’t have to take my word for it. Earlier this year, Save the Children named New Jersey the number one place in America to raise a child. Well, I want it to stay that way.
In New Jersey, we invest in public schools because we know they prepare students to compete in high-paying fields like biotechnology, sustainable agriculture, and medicine. In New Jersey, we invest in public health and law enforcement because we know we’re all better off when our streets are safe and families are healthy. In New Jersey, we invest in mass transit and infrastructure because we know it connects workers with opportunities to climb the income ladder. We do these things for a reason – New Jersey is stronger when we open the doors of opportunity for as many people as possible. But the Republican Congress has put these job-creating, economy-growing, opportunity-expanding investments in the crosshairs by gutting the property tax deduction, and in the process, they are threatening the validity of legitimate programs operating in 30 other states.
The federal tax code has always worked to ensure Americans don’t pay taxes twice on their hard-earned money -- that is, until Donald Trump came along, Republicans abandoned their so-called fiscal conservatism, and together they passed a tax scam that subjects hundreds of thousands of New Jerseyans to double taxation. For as long as I can remember, I’ve heard my Republican colleagues preach about protecting – not punishing – success. But the Republican tax law is a tax on New Jersey’s success, slamming hundreds of thousands of families with higher property tax burdens – not in a few years. Not in a decade. Now. It’s not fair and it’s not right. It’s wrong to force New Jersey families to pay more just so that big corporations and wealthy CEOs can pay less.
In the end, I can’t in good conscience support this nominee. He won’t protect New Jersey’s middle class from higher property tax bills. He won’t respect perfectly legal state-based programs that offer tax credits in return for contributions to nonprofits that do critical work in their communities. He’ll be nothing more than a Republican rubber stamp for President Trump’s politically motivated tax policies.
Whether you want to take a stand against double taxation, or you don’t agree with the Trump Administration’s politically-motivated assault on the rights of states to set their own tax policies, I hope Republicans and Democrats can join me in voting down this nomination. Taxpayers in New Jersey and across the nation deserve better than tax policies that knock the knees out from under them and an IRS commissioner who kicks them while they’re down.
With that, I yield the floor.