Everyone from the media to tax planners to the people who voted for it are still digesting the Republican tax bill that squeaked through the U.S. Senate in the dark of night. We’ll probably revisit this plenty in the future, but whatever your politics, this is an abysmally bad deal for New Jersey.
For starters, let’s focus on property taxes, the ultimate Garden State bugaboo and a problem that would be significantly worse under the tax plan President Donald Trump wants to make his first piece of significant legislation.
Let’s start with property tax deductions. The ability to deduct state and local taxes is essentially the only thing keeping the lights on in New Jersey, where the average property tax is nearly $9,000, but plenty of municipalities approach — or exceed — $20,000.
The House trims the so-called SALT deduction to $10,000; the Senate version holds the SALT altogether. Now, combine that with proposed changes to mortgage interest deductions. The Senate bill maintains the status quo — deductions of up to $1 million on up to two homes — while the House halves it to $500,000 on a first home only.
What are you left with? Not much of a workforce. With property taxes taking a bigger bite out of savings, and homes and existing mortgages suddenly far more expensive, you’ll see companies having a harder time recruiting talent in New Jersey.
The Garden State has long built its economy on how close it is to New York; with costs becoming what they are, many executives will decide to just bite the bullet and consider a move to New York — or pull out for a low-cost state in the flatlands. The real estate industry, one of the state’s most important sectors, will collapse as properties are foreclosed or abandoned and demand for new housing withers on the vine, taking thousands of construction jobs along with it.
And as to high-education positions banking on New Jersey’s strength as a STEM powerhouse, the House plan to eliminate exemptions for tuition waivers would force graduate students to pay taxes on scholarships, fellowships and the like, adding thousands of dollars to expensive degrees. Businesses in the “eds and meds” sector will have even stronger incentive to get out.
If you were trying to write a piece of legislation more damaging to New Jersey and its immediate neighbors, you would have a hard time doing worse than this.
Gov.-elect Phil Murphy has joined leaders in those states (and California) in saying he expects to fight tooth and nail to stop it. Let’s hope the political neophyte is ready for the fight of his life, because New Jersey’s entire economy depends on it.