President Obama’s proposed cap on the value of the deductions and bite harder in New Jersey than many other states
Sunday May 12, 2013, 11:47 PM
By HERB JACKSON
“NJ/DC” COLUMNIST
Several deductions that help offset the high cost of housing in North Jersey and the property taxes that come with it may be scaled back as the White House and Congress debate ways to overhaul the federal tax code.
Among the 50 states, New Jersey is one of the biggest beneficiaries from the deductions of local property taxes, state income taxes and mortgage interest.
Given how federal policy usually scales back the value of benefits as wealth increases, and targets spending toward lower-income beneficiaries, the deductions represent a rare case where a high-wealth state such as New Jersey comes out near the top from a federal policy.
But economists also see these deductions as an expensive “tax expenditure,” with a national price tag last year of $181 billion that would have otherwise been owed to the federal government, according to the Congressional Research Service. And that high price tag makes them a tempting target for House and Senate tax committees trying to rewrite the code to meet different policy goals without raising rates.
For New Jersey, the three breaks combined were worth an average $9,879 per tax filer in 2011, about 80 percent higher than the national average.
One plan proposed by President Obama would cap the value of the deductions and bite harder in New Jersey than many other states.
A study by Citizens for Tax Justice found that while only 3.6 percent of taxpayers nationwide would pay more under Obama’s plan, the rate would be 6.7 percent — almost double the national average – in New Jersey.