Midterm Issues: Part I – SALT, a potent weapon 

With just a month to go, what are the key issues in our Senate and House races which candidates are addressing and how do their positions vary?  Each race is different depending on a variety of factors. However, there are big issues that span the midterm contests.

One issue which consistently runs through most districts is SALT, included in Trump’s tax law passed last year – a $10,000 cap on the federal deduction for state and local taxes. So toxic was this bill considered in our state that both NJ senators and all our representatives voted against it, with the one exception of Tom MacArthur (R) in CD 3. Below you can see the high average of SALT deductions and percentage of tax returns claiming the deduction in each district. This is an issue where Democrats have a potent weapon and should not be shy to use it. 

2017 data courtesy of CNBC

 

 

 

 

 

 

 

 

 

 

 

 

With the “can do” ugly spirit of so many Republican legislators in this era of Trump, the emboldened House last Friday voted to make the tax overhaul, including SALT, permanent. In the process they resurrected a hot-button issue for Democrats, particularly in our close races. Once again all our legislators voted against it with the sole exception of MacArthur.

In the NY Times Nick Corasaniti points out some Republicans are trying to neutralize the issue by saying that they support the tax law, but oppose the SALT cap. Arch-conservative Assemblyman Jay Webber running against  Mikie Sherrill (D) in the open seat CD 11, says of the bill, “We should embrace it.” However, he tries to have it both ways, adding that the limit on the SALT deduction was “a bad part in an otherwise good bill.” Mikie Sherrill, wasted no time taking to social media and sending emails announcing that “Washington Republicans are seeking to punish New Jersey taxpayers.”

Tom Malinowski (D) who is challenging incumbent Leonard Lance (R) in CD 7 weaves the tax issue into nearly every speech. Lance has said, “My constituents know I will fight for complete deductibility.” Nonetheless, the issue has become one of the flashpoints in his re-election campaign. (See the preview photo of challenger Tom Malinowski above. Credit:Bryan Anselm for The New York Times.)

In CD 4, as in almost all districts, the long-time incumbent Republican Chris Smith voted against both SALT tax bills. Nonetheless, challenger Josh Welle (D) criticized Smith for not fighting more strongly. He said, “Where was Chris Smith when the SALT deduction was passed?” The fact that a Republican voted against the tax bill should not stop the Democratic candidate from speaking out. Most NJ Republicans liked everything else in the tax bill.  

In open seat CD 2 Seth Grossman (R), known for saying “diversity is a bunch of  crap,” supports the entire Republican agenda, including the Republican Tax Plan. The conservative Democrat Jeff Van Drew, while not addressing SALT directly, says, “We need tax reform that benefits middle-class families not the multi-millionaires and corporate giants.” Van Drew has little to worry about as his election seems assured.  

In CD 5 incumbent Josh Gottheimer (D) is strongly opposed to the SALT provision and is running to retain his seat against John McCann (R). Gottheimer has said about SALT, “It is the No. 1 issue I hear about, and I hear about it from Democrats and Republicans.” Incredibly, McCann has given his support to the bill including SALT despite the high number of district constituents who will suffer the results.

In CD 3 incumbent Trump toady Tom MacArthur (R) was the sole NJ representative to support both bills. Nonetheless, he is particularly vulnerable over the SALT issue. “Taking away state and local deductions, that really hurts people in New Jersey,” said Rich Gilligan of Marlton volunteering for challenger Andy Kim (D). “This is the first time I’ve knocked on doors my entire life,” he added. Following passage of the 2017 law, MacArthur said about the SALT provision “It’s a huge win. And I am now content with that part of the bill.” Kim is trying his hardest to make MacArthur rue what he said and did. 

Never mind that the Senate is unlikely to pass the bill, the House’s action last Friday is haunting NJ Republicans. In our quest to flip districts and regain the majority in the U.S. House, Democrats should continue focusing on how the law is hurting New Jersey voters. 

Comments (5)

  1. NJBlech

    If a Democrat were president and he instituted a a cap in SALT deductions to pay for social programs I doubt there would be such outrage from liberals and progressives. In no congressional district does a majority of residents claim a SALT deduction, the percentages ranging from 33% (CDs-10)-46% (CD-7). And the average SALT deduction in the congressional districts ranged from $11,422 (CD-2) to $21,276 (CD-7). Therefore, in all NJ CDs there is a considerable majority that are not affected by the SALT cap. And I rather suspect that those folks are the ones struggling the most economically. Therefore, the bad policy to me is not the SALT cap but rather how the money collected from the SALT cap is being spent (funding tax cuts).

    Reply
  2. Bill Orr (Post author)

    In the districts where the average deduction ranges from $21,276 to $11,422, all districts exceed the $10,000 cap. In the highest district the average resident loses $11,276 in deductions. It seems painful and that a lot of people are involved.

    The fact that in varying districts, 56% down to a low of 33% of residents are claiming a SALT deduction seems like a lot of residents to me.

    The monies collected could be used for a variety of purposes (some which you may dislike) and not necessarily to reduce taxes.

    This loss is particularly difficult in New Jersey where real estate taxes are high. In 2017 the average NJ resident paid almost $9,000 in homeowner taxes, leaving very little left for other deductions.

    Reply
    1. NJBlech

      Based on the graphic in which district are 56% (a clear majority) claiming a SALT deduction? I don’t see that. The highest percentage claiming a SALT deduction is 46% in CD-7. Sure there are a lot of people claiming a SALT deduction but — based on the data in your post — in no CD is there a majority of citizens that claim a SALT deduction in excess of $10,000 and thus impacted by the cap (to further the dialogue, a better graphic would be one that showed the % of citizens impacted by the SALT cap in each CD rather than those that claim a SALT deduction). Sure “a lot of people are involved” in NJ that are impacted by the $10,000 cap. There are a lot of well off people in NJ. I am sure the Norcrosses, DiVincenzos, and Christies are impacted by the $10,000 SALT cap. Should there financial well being be a priority of the progressive wing of the Democratic party? Based on my interpretation of the graphic 54-67% of people in NJ CDs do not claim a SALT deduction, either because they are 1) homeowners who do not itemize or 2) not homeowners. And these two groups of people, along with homeowners with less than $10,000 in SALT deductions, are much more likely to be under water economically.

      Reply
  3. Fred Kahan

    Potent weapons deserve accurate aim, and not at an illusory average income given the inequitable distribution of wealth. One year ago, NJ Spotlight (https://www.njspotlight.com/stories/17/10/06/interactive-map-tracking-salt-deductions-across-the-state/ )provided the precise locations where targeted canvassing could leverage the SALT issue. For example in CD3, residences in Moorestown had an average income of $176,195, three-quarters of it subject to earned income tax rates, with an average SALT deduction of $52,946. Contrast this with the “average” $11,987 SALT deduction for all of CD3. Many of these residents are “HENRY’s” (High earners, not rich yet) and bear these high rates willingly for the educational and social benefits they bring. These benefits are available to less wealthy residents as well, just as our system of graduated income tax intends them to be.

    At the time Tom MacArthur voted for the Trump Tax Cut he declared his intent that “Democrats in Trenton” should reduce state taxes in proportion.
    (https://www.nytimes.com/2017/12/07/nyregion/republican-tax-plan-new-york.html )
    Sen. Sweeney obliged by blocking Governor Murphy’s original millionaires tax! Millionaires deserve no such assistance; they disproportionally benefit from the much reduced rates on unearned income.

    The SALT tax underwrites in full, tax cuts for the wealthy.( https://www.cbpp.org/research/state-budget-and-tax/eliminating-state-and-local-tax-deduction-to-pay-for-tax-cuts-for ) Little wonder that the GOP (including MacArthur) have now voted to make it permanent.

    Reply
  4. Bill Orr (Post author)

    As John Reitmeyer points out in NJ Spotlight:

    “NJ and other states are seeking to overturn the cap on the grounds that it unfairly targets residents of high-cost, majority Democratic states like New Jersey.

    “The push to make the SALT cap a permanent part of the tax code also coincides with the release of new Internal Revenue Service data that indicate average taxpayers in New Jersey who have used the deduction will face a tax hike in nearly every county thanks to the new cap, generating a new round of outrage from Democrats.

    “What’s more, the Internal Revenue Service has changed its regulations in order to make it harder for states to create effective workarounds that let individuals donate to a civic charity that would then be used to pay for government services.”

    https://www.njspotlight.com/stories/18/09/11/congressional-gop-rub-salt-in-wound-push-for-permanent-cap-on-tax-deduction/

    Reply

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