Christie, NJ Lawmakers Propose Changing State Property Tax Deduction

Christie proposed changing the state’s tax code to allow homeowners to write off their entire property tax bill.

Chris Christie.

Gov. Chris Christie and New Jersey lawmakers are considering changes to the state’s tax code to allow homeowners to write off their entire property tax bill, a response to a federal tax overhaul that’s expected to harm high-tax states such as New Jersey.

New Jersey currently caps property tax deductions for state income tax filers at $10,000. Christie called for the elimination of that cap on Wednesday, arguing it would mitigate the effect of a GOP tax bill signed by President Trump on Friday. The federal tax overhaul will scale back the popular state and local tax deduction on income taxes, capping it at $10,000.

“We can do something to fix this and we should,” Christie said during an unrelated news conference in Trenton. “In my view, we should make property taxes on our state income tax returns completely deductible in response to what the federal government has done, because if we don’t it will have an effect on property values in the state.”

The proposal already has bipartisan support in the state Legislature. Sen. Joe Pennacchio (R-Morris) introduced a bill (S3598) two weeks ago to make property taxes completely deductible from state income taxes. Outgoing Sen. Ray Lesniak (D-Union) announced he will also sponsor a bill and try to get it signed into law before Christie leaves office on Jan. 16.

“Seizing this opportunity to provide immediate property tax relief should be the top priority in Trenton,” Pennacchio said in a statement.

New Jersey residents pay the highest property tax bills in the nation, and opponents of the federal tax overhaul warn that curtailing the SALT deduction will force some state residents to send more money to the federal government and reduce property values.

Making property taxes completely deducible from state income taxes would cost New Jersey between $150 million to $170 million, Christie said. He called that a “relatively affordable fix” within a $34.7 billion budget. “I can always find $150 million to $170 million,” he said.

But New Jersey Policy Perspective, a liberal think tank, described the tax break idea as misguided.

“Changing the deductibility of local property taxes on New Jersey income taxes is not a sound response to the disaster that is the GOP tax plan,” NJPP President Gordon MacInnes said in a statement. “The GOP tax plan is actually just step one of a two-step scheme that will ultimately lead to New Jersey receiving even less federal dollars than it does today. With that on the horizon, and urgent unmet needs across the state, the last thing New Jersey policymakers ought to be doing is cutting state revenues by an additional $150 million or more a year.”

Lesniak said Friday that separate legislation he has sponsored to close corporate tax loopholes could cover the cost of the tax break.

Governor-elect Phil Murphy, a Democrat, said Thursday that allowing full deductibility of property taxes from New Jersey income taxes is “not a crazy idea,” but didn’t endorse the proposal either.

“We have said — and I mean it now that this thing has passed — everything has to be on the table,” Murphy said. “That’s, by a long shot, not a crazy idea. Some ideas out there are crazy and really disturbing, but that’s one that needs to be on the list to look at. I haven’t thought about whether it’s now or later. It should get looked at.”

Murphy has floated the idea of a legal challenge to the GOP tax overhaul, which is threatening his plans to raise income taxes on millionaires. While initially promising to pass a millionaires tax, Senate President Steve Sweeney (D-Gloucester) has said the Republican rewrite of the federal tax code could force him to re-evaluate those plans. Christie, NJ Lawmakers Propose Changing State Property Tax Deduction