The average Essex County home, according to Zillow, is worth $391,500. But it should really be about $40,000 more than that, a new independent study has found.

It isn’t because of a bad housing market.

The culprit is the Republican tax law signed by President Donald Trump, according to Moody’s Analytics.

The law’s limits on how much you can deduct from state and local taxes — a $10,000 cap — contributed to reducing the average value of a home in Essex by as much as 11.3 percent below what it would have been if the law was not passed, the study found.

It’s a bigger loss than any county in America.

And it’s felt all around New Jersey — of the 30 counties with the largest estimated percentage loss of home value, 16 are in the Garden State. All 21 counties in New Jersey had reduced home values, the study found.

In addition to Essex, six other New Jersey counties were in the top 10: Union, Bergen, Passaic, Somerset, Mercer and Hunterdon, all with reduced home values of at least 9.6 percent due to the tax law.

“The tax law change wasn’t very friendly to the region that includes New Jersey,” said Mark Zandi, Moody’s chief economist, who said he didn’t expect the impacts of the tax law on the region’s housing market “to be that large.”

“The tax benefits mostly accrued to other parts of the country,” he said. “In places like New Jersey and the Northeast, taxpayers relied more heavily on the tax deductions that were scaled way back in the tax law change.”

The study took into account all of the changes in the 2017 tax law, which passed with no Democratic support, as well as the legislation’s impact on the economy. The measure also reduced the size of a mortgage a homeowner could take out and still deduct all the interest, lowered tax rates for corporations and individuals, and slashed the tax paid by less than 1 in 2,000 estates, none of them small businesses or family farms.

The bottom line is limiting tax deductions adds to the cost of owning homes, and buyers have to consider this when deciding how much they can pony up.

This is not to say that property values in the state are declining, just that they would be higher without the cap. The median sale price in New Jersey from August 2018 to August 2019 rose about 5.3 percent to $307,000, said Ilene Horowitz, president of the New Jersey Realtors and a longtime Realtor in Morris County.

Buyers are gobbling up homes in the $200,000 to $300,000 price range, Horowitz said.

But the average home in the state is worth more than that — $328,000, according to Zillow — and Horowitz said expensive houses, which carry higher property tax bills, are taking longer to sell.

She said she was advising sellers to take the deduction cap into account when pricing those higher-priced homes.

“Do we see that it is a concern when buyers are budgeting for their home? Yes," she said. "Taxes are always a concern, because taxes can add an extra $1,000 a month onto a mortgage payment. When they have to consider an extra possible $1,000 a month in their taxes, that can change their purchasing power. That can change their wish list and that can change some of their needs.”

The study drew angry reaction from New Jersey Democratic lawmakers who opposed the tax law and have blasted its limits on state and local tax deductions in a state that has America’s highest property taxes.

“I feared the day would come when home values across our state would take a hit as a result of a purely partisan Republican tax plan that got shoved down our throats,” said U.S. Sen. Robert Menendez, D-N.J., the top Democrat on the Senate housing committee and a member of the Senate Finance Committee.

Rep. Bill Pascrell Jr., D-9th Dist, called the study “shocking."

“Many middle-class taxpayers in north Jersey are resting their financial future in their biggest investment — their home," said Pascrell, a member of the House Ways and Means Committee. "Now because of this law ... local homeowners’ taxes are higher and their houses are worth less. Why? Solely so big corporations could get even more money.”

The deduction limit on what is popularly known as SALT, for state and local taxes, was imposed in order to reduce the tax law’s impact on the federal deficit. Even then, the law increased the flow of red ink by $1.9 trillion over 10 years.

The cap disproportionately affected New Jersey and other high-tax states, most of them Democratic-run.

Before the deduction was limited, the average state and local tax break for 860,000 Jersey households with income between $75,000 and $200,000 exceeded $10,000, according to Internal Revenue Service statistics.

Republicans who pushed the law said the deductions from high-tax states reduced how much their taxpayers forked over to the federal government, meaning taxpayers from other states were subsidizing them.

But a study from the State University of New York’s Rockefeller Institute of Government found that higher tax states such as New Jersey sent Washington billions of dollars more than they received in federal services.

That led Rep. Josh Gottheimer, D-5th Dist., to brand the other, mostly red, states as “moocher states.” He said they "took a direct hit at New Jersey, gutting the state and local tax deduction, sending property values down and taxes up. ”

The tax law was so unpopular that it helped Democrats win four of five Republican-held congressional districts in New Jersey, including the seat held by Rep. Tom MacArthur, R-3rd Dist., the only Garden State lawmaker of either party to vote for it.

Menendez and Pascrell have introduced legislation to restore the full deduction, to be paid for by bringing back the top tax rate on the wealthy that was reduced in the GOP tax law.

In the meantime, New Jersey looked for other ways to get around the cap. A federal judge rejected a lawsuit filed by several states, including New Jersey, claiming that the $10,000 deduction limit was an unconstitutional way of coercing them to change their tax policies.

And the Legislature said municipalities could set up charitable funds, which are not capped, to receive donations in lieu of property taxes. But the Internal Revenue Service, following an extraordinary intervention by top Treasury Department officials, rejected that as well.

Murphy said his administration will continue to fight the decisions.

Jonathan D. Salant may be reached at jsalant@njadvancemedia.com. Follow him on Twitter @JDSalant or on Facebook.

Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter@samanthamarcus.

Find NJ.com Politics on Facebook.

Have a tip? Tell us. nj.com/tips.

Get the latest updates right in your inbox. Subscribe to NJ.com’s newsletters.