WASHINGTON -- New Jersey taxpayers would lose their ability to deduct state income or sales taxes, and have their property tax break capped at $10,000 under tax-cutting legislation released Thursday by House Republican leaders.
The measure targets the state and local tax deduction, which disproportionately affects high-tax states like New Jersey whose federal tax dollars subsidize other, lower-tax states, as it seeks to reduce rates for individuals and corporations.
The details were obtained by NJ Advance Media in advance of the official rollout.
Four of every 10 Garden State taxpayers deduct either income or sales taxes, behind only Maryland and Connecticut, according to New Jersey Policy Perspective, a progressive research group. Of those taking the deduction, 83 percent make less than $200,000 a year.
Of the 44.3 million federal taxpayers who took the state and local tax deduction in 2015, 38 million, or 86 percent, reported income of $200,000 or less, according to the Government Finance Officers Association.
New Jersey taxpayers sent $3,478 per person more to Washington than they received from the federal government in 2015, more than any other state, according to a report from the State University of New York's Rockefeller Institute of Government.
Republicans are seeking to pass the tax cut legislation through a procedure known as reconciliation, which prevents a Senate filibuster and allows them to avoid having to compromise with Democratic lawmakers.
The House GOP tax proposal, scheduled to be considered by the House Ways and Means Committee next week, would preserve the deductions for mortgage interest, but only up to $500,000 for newly purchased homes. Existing mortgages would not be affected.
It would almost double the standard deduction for a married couple to $24,000 from $12,700, but remove the personal exemptions of $4,050 per person. Some of that would be offset by an increased child tax credit.
The corporate tax rate would drop to 20 percent from 35 percent, and businesses organized as pass-through corporations, meaning the income is deducted by the owners on their personal income tax returns, would be set at 25 percent.
The legislation repeals the inheritance tax, which falls only on estates worth at least $11 million for couples, less than 1 percent of them family farms or small businesses.