House just voted to restore your property tax relief under $ 1.75 billion spending plan

The United States House acted Friday to restore most of the federal deduction for state and local taxes cut by Congressional Republicans four years ago, voting to increase the cap to $ 80,000 until 2030 .

The higher limit for deducting state and local taxes, known as SALT, was included in President Joe Biden’s $ 1.75 trillion proposal, which passed 220-213, with every Republican, including Representatives Jeff Van Drew, R-2nd Dist., and Chris Smith, R-4th Dist., voting no. All 10 House Democrats in New Jersey backed the bill.

“Big tax cut for Jersey,” said Rep Josh Gottheimer, D-5th Dist., Who has helped lead the fight to reinstate the deduction. “I’m over the moon, but more importantly I know the families at home are going to be over the top. “

“If you’re against this bill in Jersey, you’re basically saying you’re against lowering taxes,” he said.

This legislation, the third of the three biggest spending bills in response to the coronavirus pandemic and the economic downturn it has caused, would expand health coverage, lower prescription drug prices, reduce childcare costs, provide nursery school for 3- and 4-year-olds, extend for one year, the expanded child tax credit for lower and middle class households with children, ban offshore drilling in the Atlantic Ocean and take action to fight against climate change.

“This puts us on track to rebuild our economy better than before by rebuilding America’s backbone: working people and the middle class,” Biden said after the vote.

Friday’s action came after Progressives delayed a vote for months on a five-year, $ 1 trillion bipartisan infrastructure measure, which Biden signed into law on Monday. They did it to ensure that the moderates would support this bill, which they did.

Biden did not include the national and local deduction in his initial proposal, but White House press secretary Jen Psaki said Thursday the president was “comfortable with this development” and learned that the bill wouldn’t go through Congress without him.

“This is a sustainable solution, in our view, which means low-income people would be able to fully write off their national and local taxes,” Psaki said. “It’s part of the compromise.”

Changes to the deduction have yet to be approved by the Senate, and the final provision may look very different from the one passed by the House. U.S. Senator Robert Menendez and Senate Budget Committee Chairman Bernie Sanders, I-Vt., Are working on a plan to remove the entire cap, but impose an income limit of at least $ 400,000 to claim the deduction.

After a gubernatorial election in which New Jersey’s high taxes were a major issue and Gov. Phil Murphy won a tighter-than-expected race, endangered New Jersey House Democrats hailed the reinstating vote most local and national tax breaks.

One of them, Representative Mikie Sherrill, said she looked at three issues: funding the Gateway Tunnel, restoring the tax deduction and reducing prescription drug costs.

Gateway was in the infrastructure bill. The other two were in the bill the House passed on Friday. Biden also signed a $ 1.9 trillion coronavirus stimulus bill with direct payments of $ 1,400 to most Americans earlier this year, without unanimous opposition from Republicans.

“If people feel like I’m doing something for them, if they think the priorities I have are the priorities they have, I think it’s going to be very compelling,” said Sherrill, D-11th Dist.

Bills are popular with Americans. In a Quinnipiac University poll released on Wednesday, the infrastructure bill was supported by 57% to 37% and the bill that passed on Friday was supported by 58% to 38%.

The house tax provision would increase the limit on the deduction to $ 80,000 from this year until 2030. The limit would drop to $ 10,000 in 2031 before disappearing altogether. The additional revenue from maintaining a cap after it expires in 2026 under Republican tax law would fund the higher deduction cap and reduce the federal deficit.

“Considering our cost of living and tax rates in New Jersey, if you’re a married teacher to a firefighter, a $ 10,000 cap hurts you a lot,” Rep. Tom Malinowski, D said. -7th Dist., Who proposed the plan. . “We have designed a solution that offers full deductibility to all these middle class people at no cost to the federal budget over 10 years.”

Other than California, no state would fare better under the higher deduction cap than New Jersey, according to the Progressive Institute of Taxation and Economic Policy. The average Garden State taxpayer would save $ 980, behind just $ 1,070 in California.

Republicans in Congress have criticized the SALT provision as a gift to the wealthy. “Penthouse gets obscene $ 125,000 tax break – but building janitor gets nothing,” said Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee .

Tax Policy Center analysis found that while 70% of the benefits went to the richest 5% of taxpayers, nearly half of those who would see their deductions increase, 47%, earn less than $ 254,500. Even with the increase in the SALT deduction, the richest 1% of taxpayers would see their taxes increase, the center said.

According to the Tax Policy Center, the Republicans’ tax cut in 2017 granted 21% of the benefits to the richest 1% of taxpayers, and they sought to repeal the tax paid only by estates of more than $ 11 million. dollars, none of which are family farms. or small businesses. Their tax law increased the federal deficit by about $ 1.9 trillion over 10 years.

“Republicans didn’t cap SALT in 2017 because they wanted to tax the rich, they cap SALT to pay even bigger tax cuts for the super rich and corporations and to punish states like New Jersey where we pay a little more tax to support the best schools in the country, ”said Malinowski, another of the Democrats at risk.

Republicans have admitted to placing a deduction cap to make it more difficult for New Jersey and other states to raise local taxes to provide services to their residents, a topic that House Speaker Nancy Pelosi, D -California, addressed at a press conference hours before the vote.

“It’s not about who gets the tax cut, but which states get the income they need to meet the needs of the people,” Pelosi said at a press conference Thursday. .

While Smith opposed the GOP tax cut and supported other efforts to restore the national and local deduction, he said he voted against the measure because of concerns about inflation and the cost of the bill.

“We don’t have that money,” he said. “I wish there was a stand-alone SALT bill.”

He also said the legislation provided for taxpayer funding for abortion. “Taxpayers should not be forced to subsidize or facilitate the murder of an unborn child,” he said.

Van Drew explained his vote this way: “We cannot allow the federal government to insert its overly broad governmental scope into the lives of Americans, from the time they are born, and undermine the right to individual freedom ”.

This latest spending bill would increase the federal deficit by $ 367 million over 10 years, but that figure could decrease or even disappear if the Internal Revenue Service’s new effort to get wealthy Americans to pay all the taxes they they should bring in more income than expected.

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Jonathan D. Salant can be reached at [email protected]. Follow him on @JDSalant.

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