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NJ Democrats continue pushback against IRS SALT caps

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Gov. Phil Murphy holds a press conference on the IRS response on the State and Local Tax Deduction on Aug. 24 in Trenton.
Gov. Phil Murphy holds a press conference on the IRS response on the State and Local Tax Deduction on Aug. 24 in Trenton. - ()

New Jersey's Democratic lawmakers have vowed a continued push against the Internal Revenue Service's efforts to block the state's workaround for the federal cap state and local taxes.

Murphy at a Friday press conference flanked by Senate President Stephen Sweeney, D-3rd District, Assembly Speaker Craig Coughlin, D-19th District, and First Assistant Attorney General Jennifer Davenport reiterated plans for a potential legal filing “in the near future.”

The IRS’ new proposals would mandate that if a taxpayer received a benefit from their local government for state or local taxes, they’d have to reduce the amount claimed for charitable deductions on their tax returns, which Murphy called a political act by the agency.

“The IRS is setting a dangerous precedent, they are saying that no matter what the states do, the rules as they exist … they’ll just change them if they don’t like what you’re doing,” Murphy said Friday. “It’s an extraordinary politicization for the regulatory process.”

Last week, Gov. Phil Murphy and Attorney General Gubir Grewal vowed legal action against the IRS’ new rules that would prevent residents of high-tax states, such as New Jersey, from being able to pay their property taxes as charitable contributions and deduct those payments from their taxes.

Grewal unveiled prior legal action in July, alleging that the IRS’ $10,000 cap on SALT deductions was politically motivated against states like New Jersey.

Murphy signed a bill in May which would have allowed taxpayers to pay up to $15,000 in charitable contributions to their towns, which they could deduct from their federal taxes, as a workaround to the cap.

Coughlin and Sweeney both voiced their agreement with Murphy and said they’d be backing any legislative action wherever possible.

“We’re prepared to fight this as long as it takes, in every form that it takes, and to ultimately do whatever it takes to make sure that New Jersey taxpayers are stuck up for,” Coughlin said.

Added Sweeney, “Whether or not you like to fight … this is a fight we have to wage.”

Coughlin declined to comment on what kind of bills the Legislature might propose to support the Murphy administration.

Murphy’s stance drew rebuke from state Republicans. New Jersey Republican Party Chairman Doug Steinhardt said Murphy was using taxpayers’ dollars to fund “frivolous lawsuits” so that he could garner national attention as a Trump opponent.

And Senator Steve Oroho, R-22nd District, a key member of the Legislature’s New Jersey Economic and Fiscal Policy Workgroup, said lawmakers should convene a special legislative session to examine lowering the state’s property taxes.

“This proposed rule is another wake-up call that we cannot wait on property tax reform,” Oroho said. “Solving our property tax crisis is the number one issue New Jersey faces and waiting around for lawsuits and fighting over technicalities is not getting the job done.”

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Daniel J. Munoz

Daniel J. Munoz


Daniel Munoz covers politics and state government for NJBIZ. You can contact him at dmunoz@njbiz.com.

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