WASHINGTON -- The Republican tax plan backed by President Trump would smack New Jersey residents and drive businesses out of the Garden State, critics said Monday.
More than one in four New Jersey residents would face tax hikes under Republican legislation that sharply curtails the federal deduction for state and local taxes, according to a study released Monday. That's a higher percentage than in all but two states.
The bill drew opposition from the New Jersey Chamber of Commerce.
"This proposal is exactly what we do not need at this time," President Tom Bracken said.
And the Fitch Ratings agency warned that New Jersey and other high-tax states "would be more affected and may have less tolerance for higher taxes going forward" under the legislation that ends the deduction for state and local income and sales taxes and caps it for property taxes.
"The House tax plan remains a toxic stew for New Jersey, with special breaks that are overwhelming tilted to the top and more than one in four Garden State households facing a tax hike," said Jon Whiten, vice president of New Jersey Policy Perspective, a progressive research group.
Only two other states, Maryland and California, would see a greater percentage of their residents facing a tax increase under the GOP legislation than New Jersey's 27 percent, according to the study by the Institute on Taxation and Economic Policy, a progressive research group.
The findings were released Monday as the House Ways and Means Committee began debating legislation that would eliminate or reduce the state and local tax break.
"The tax code is rife with loopholes and complicated deductions that need to be simplified," said Rep. Bill Pascrell Jr., D-9th Dist., the only New Jersey lawmaker on the panel. "Simplifying the code and eliminating or curtailing the major deductions that middle class families rely on in order to finance a windfall for corporations and the top 1 percent are two very different things."
The state and local tax deduction is disproportionately used by residents of New Jersey and other high-tax states that send billions of dollars more to Washington than they receive in services. Corporations, unlike individuals, could continue to deduct those taxes.
While the chamber came out against the bill, Rep. Tom MacArthur, R-3rd Dist., became the first New Jersey lawmaker to endorse it, telling Fox News Channel that preserving a property tax deduction of up to $10,000 was "a huge win for middle class taxpayers, even in high tax states like mine."
The remaining property tax break, however, would be worthless to most homeowners because they wouldn't have enough other deductions to itemize rather than take the enhanced standard deduction of $24,000, according to the institute study.
That would put people living in high-tax states at a disadvantage because they would now be getting the same deduction as those in lower-taxed localities.
"If this legislation is approved, people and businesses will have another reason to leave New Jersey, and people thinking of living here or moving their business here will have another reason to look for an alternative," said Bracken, the chamber president. "This legislation would make New Jersey less affordable and less competitive, and impede our ability to climb back to an acceptable level of prosperity."
Furthermore, the cap wouldn't cover the average property taxes in four New Jersey counties -- Essex, Bergen, Union and Morris -- which already exceed $10,000, according to the state Department of Community Affairs.
In addition, four of every 10 Garden State taxpayers deduct either income or sales taxes, behind only Maryland and Connecticut, according to New Jersey Policy Perspective.
Besides capping property taxes, the bill limits the deduction for mortgage interest to the first $500,000 of a home's purchase price.
That could contribute to a loss of a home's value and a corresponding drop in property taxes, according to Fitch, one of the big three ratings agencies along with Standard & Poor's and Moody's Investor Service.
"This change could result in lower revenue growth prospects for local governments absent tax rate increases," the agency said.