The new federal tax plan did a number on high-tax states, which, of course, includes New Jersey. Trying to find a work-around is natural.
By Alan Bauer
The Sun
State lawmakers might do away with property taxes, or most property taxes. How exciting is that?
If the story stopped there, it would be parade-worthy. But, of course, there’s a catch.
The new federal tax plan did a number on high-tax states, which, of course, includes New Jersey. The measure capped the amount of state and local taxes residents can deduct on their federal returns at $10,000. There are approximately a whole bunch of homeowners in New Jersey who pay a lot more than that in property taxes every year.
But the state has a solution. Or maybe a solution. It depends on what the IRS thinks.
A bill, S-1893, would allow tax entities such as school districts, municipalities, etc. to set up charitable trusts. Instead of paying taxes, homeowners would make “donations” to these trusts and get a whopping tax credit in return. The Senate approved the measure last week. The Assembly is up next. Gov. Murphy likes the idea.
A few things:
First, just calling property taxes “donations” feels weird, doesn’t it?
Second, these “donations” wouldn’t be optional, which again is kind of weird since most people make donations out of the kindness of their heart, not government mandate.
Third, we have no idea if the IRS will sign off on this, since, with traditional tax-exempt donations, you don’t get something of value in return, or, if you do, it affects the amount of the donation you can write off.
But we give lawmakers credit for creativity. The new federal tax law hit a lot of homeowners (and probably most of our lawmakers) really hard. Trying to find a work-around is a natural response.
So we wish them well in their end-run attempt around tax laws. After all, what other solutions are there? It’s not like they’re actually going to fix the state’s overly reliant on property taxes system, right?
