opinion

Opinion: Charitable donation law is a Jersey fantasy

Wealthy people throughout New Jersey should be thanking Gov. Phil Murphy for signing legislation to allow homeowners to make charitable donations to their communities rather than pay property taxes. Imagine getting a bigger write-off on your federal income taxes by pretending your sky-high New Jersey property taxes are actually a charitable gift. This fantasy will not only help rich homeowners, it takes the pressure off of county, school and municipal officials who -- in light of new federal limits on deductions for state and local taxes (SALT) -- should be pressured to actually cut spending. They can now go on wasting taxpayer money without complaint.

Sorry to throw ice water on Murphy’s dream of taxes as charity -- and the anti-Trump message that comes with it -- but the IRS is not about to let property taxes become charitable donations. And that’s for reasons already ignored by the governor and legislators -- when an individual gives money in return for something of value, he cannot call it charity. In Murphy’s property tax reincarnation, municipalities would have to argue that most of what they charge homeowners has no value, in order for taxpayers to get a charitable deduction.

Reality aside, it’s hard to imagine the fiscal carnage that would occur if 565 municipalities set up charities to collect property taxes. Who would run them, and what would it cost? Who would the charities answer to -- the state? How will creating a vast new bureaucracy -- the Department of Municipal Charities - be financed? By property taxes, no doubt.

The charity gambit allows the governor to deftly ignore New Jersey’s property tax problem -- which he has no plan to solve. To camouflage this reality, Murphy is embracing the magician’s trick of deception. Instead, he’s telling everyone, “hey, look over hear and let me tell you about my great plan to dampen the impact of the president’s tax reform policy,” while state spending goes on unabated.

While Murphy is bemoaning the federal limits on SALT deductions, the state maintains its limit on real estate tax deduction on state income taxes to $10,000. The governor could help taxpayers tomorrow by doubling the deduction. Will he do it?

Irony of ironies, but standing next to the governor when he signed the charity bill in East Rutherford was Assemblyman John McKeon, a sponsor of the charity bill who, as mayor of West Orange, presided over a town with one of the most onerous property tax burdens in the state. His term as mayor was brought to a hasty end by angry residents leading a tax revolt. The average property tax bill in West Orange last year was $13,475. President Donald Trump had nothing to do with that figure - but McKeon sure did.

Murphy’s progressive agenda is all about “fairness” for the working people and that’s what the federal tax bill provides. The Tax Policy Center, in Washington, D.C., reported that just 10.2 percent of New Jersey taxpayers will see their tax bills rise while 61.5 percent will get a tax cut. That's pretty fair.

The tax reform plan also benefits many small business owners who operate “pass-through” entities such as sole proprietorships; they now receive a 20 percent deduction on net qualified income.

It’s fair to note, as Murphy does, that many people will lose some deductions totaling $8,000. But the governor fails to mention that they will also see the standard tax exemption double to $12,000, or $24,000 for a couple. Most of the state’s taxpayers will also benefit by being in a new federal tax bracket that is 3 percent lower. And we can’t ignore the fact that that nearly 60 percent of taxpayers in New Jersey don’t itemize, and therefore, have no concern about property tax deductions. With a greater standard deduction and lower tax brackets, tax reform will help young couples save money faster for a house, assuming they want to stay in New Jersey.

Those hurt by tax reform -- besides the “rich” -- will be those who have modest incomes but live in high tax towns -- like West Orange. The value of their home - and the state’s reliance on property taxes -- works against them. Then again, moderate income people living in East Rutherford, where taxes average $6,568, don’t have that problem.

Gov. Murphy’s attempt to magically convert taxes into charitable deductions is a David Copperfield diversion believable only in Trenton. If we look behind the black curtain, we will see the truth -- Murphy will not lower property taxes -- but he will entertain us with charitable fantasies.

Katie Cericola of Waldwick is the vice chairwoman of the NJ Organization for Economic Growth, and an accountant.