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Gary Cohn, director of the U.S. National Economic Council. (Bloomberg | Andrew Harrer)

WASHINGTON -- A tax cut plan proposed by President Donald Trump's administration Wednesday would eliminate the federal deduction for state and local taxes, a blow to New Jersey residents who pay the highest property taxes in the nation.

Trump's chief economic adviser, Gary Cohn, said that deductions for charitable contributions and mortgage interest would be the only ones retained for individual taxpayers.

New Jersey residents pay the highest effective tax rate at 2.31 percent, according to an ATTOM Data Solutions study published by RealtyTrac.com.

The value of the deduction would fall as well as the Trump administration said it would increase the standard deduction for married couples to $24,000 from the current $12,700, meaning fewer taxpayers would have to itemize.

The state and local tax deduction is estimated to cost the U.S. treasury an estimated $63.3 billion in 2018, the ninth largest tax expenditure, according to the Tax Policy Center, a Washington-based research organization jointly operated by the Urban Institute and Brookings Institution.

Eliminating the deduction would increase the average annual tax bill for a New Jersey resident by more than $3,500, according to the Tax Policy Center.

More than 4 in 10 New Jersey taxpayers itemized rather than took the standard deduction on their 2014 federal returns, behind only Maryland and Connecticut, according to the Tax Foundation, a research group in Washington. The tax deduction was worth 8.7 percent of the state's adjusted gross income, second only to New York.

At the same time, New Jersey ranked 41st in terms of the percentage of its general revenue coming from the federal government, according to the Tax Foundation.

Cohn said that the plan was designed to help lower and middle-income Americans, but in actuality it repeals those levies that almost exclusively fall on the richest taxpayers, as well as reduces their top tax rate to 35 percent from 39.6 percent.

The plan repeals the estate tax, which benefits only multimillionaires; does away with the alternative minimum tax, which forced Trump to pay millions of dollars in additional taxes, according to his 2005 personal income tax return released by MSNBC; and lowers the capital gains tax primarily paid by wealthier Americans.

Just 0.2 percent of estates, those worth more than $5.5 million for individuals and $11 million for couples, are ever taxed, according to the U.S. Office of Management and Budget.

It also would repeal the 3.8 percent Medicaid tax levied only on individuals with at least $200,000 in investment income and married couples with $250,000. That money helps fund the Affordable Care Act, which extended coverage to more than 20 million Americans.

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