Senator Kip Bateman (R-Somerset, Mercer, Middlesex, Hunterdon) warned that the elimination of federal income tax deductions for state and local taxes as proposed under a recently announced tax reform effort in Washington could have dire consequences for many New Jerseyans.
Sen. Kip Bateman warned that the proposed elimination of federal income tax deductions for state and local taxes could have dire consequences for many New Jerseyans. (SenateNJ.com)
“I’m gravely concerned that tax reform efforts that are intended to ease the federal tax burden will instead have the opposite effect for many New Jerseyans,” said Bateman. “Losing the ability to deduct property taxes and state income taxes could lead to higher federal tax bills for many working, home-owning families in New Jersey.”
Under a tax reform plan announced by President Trump, the number of federal income tax brackets would be reduced from seven to three. Additionally, the elimination of deductions for state and local taxes would be coupled with a doubling of the standard deduction for individuals and married couples to $12,000 and $24,000, respectively.
Bateman noted that the average New Jersey property tax bill is over $8,500 annually, offsetting two-thirds of the proposed increase in the standard deduction for a married couple filing jointly. When combined with high state income taxes, the benefit of an increased standard deduction could be cancelled out completely for many New Jerseyans.
“For a couple in our area that owns a home with both spouses employed, it’s likely they’ll end up with a higher federal income tax bill, even with the increased standard deduction,” said Bateman. “The pain may be especially acute for families who are forced to itemize to take advantage of deductions for child care, mortgage interest, and medical expenses. They won’t see any benefit at all from changes to the standard deduction.”
He called on New Jersey’s congressional delegation to push for the retention of the deductions for state and local taxes as the reform plan progresses through the approval process.
“There are a lot of potential benefits of federal tax reform that could lead to economic growth across the country,” said Bateman. “Our congressional delegation must work to ensure those benefits don’t come at New Jersey’s expense.”
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