Say Governor Should Focus on Real Solutions to Lower the Cost of Government and Taxes – Not Gimmicks

Senate Republicans serving on the Senate Budget & Appropriations Committee blasted a tax evasion scheme proposed by Governor Phil Murphy that fails to address the underlying problem of expensive government that drives high property taxes in New Jersey.

“Governor Murphy’s plan to mask property tax payments as charitable contributions is a thinly veiled tax evasion scheme,” said Bucco (R-25), the Senate Republican Budget Officer. “Anyone who thinks the IRS won’t tear this plan apart is kidding themselves. New Jersey taxpayers need real solutions that won’t put them on the wrong side of the law.”

The Governor’s proposal would allow homeowners to contribute to municipal charitable funds as an alternative to making property tax payments.

It’s an attempt to skirt the new $10,000 limit on the federal income tax deduction for state and local taxes (SALT).

Senator Sam Thompson (R-12) said that Internal Revenue Service (IRS) regulations and a body of related federal case law put the Murphy plan on extremely shaky ground.

“It’s crystal clear that charitable contributions are not tax deductible if the donor receives an offsetting benefit,” said Thompson. “Since the entire scheme is designed to evade federal taxes rather than serve a real charitable purpose, it’s a certainty that Governor Murphy’s plan will be struck down. How much time is he willing to waste avoiding the consideration of real solutions before we reach that inevitable conclusion?”

Senator Steven Oroho (R-24) noted that Senate Republicans have proposed a number of achievable solutions that would cut the cost of government by billions of dollars, including health benefits reforms for public employees, limiting or eliminating sick leave payouts, and reinstating interest arbitration caps that expired at the end of 2017 which helped towns to effectively constrain labor costs.

“We’re all concerned with the impact of the federal SALT limitation, but the work-around plan doesn’t address the underlying problem of excessively expensive government in New Jersey,” said Oroho. “Rather than looking for a loophole, the Administration and Legislature should support our efforts to cut billions from the cost of government through the practical solutions we’ve proposed.”

Senator Declan O’Scanlon (R-13) pointed specifically to the reinstatement of caps on interest arbitration awards as a readily available means to protect property taxpayers.

“We need to advance a serious property tax relief plan, not the half-baked proposal the Governor has offered,” said O’Scanlon. “There’s no excuse for Governor Murphy to continue running away from renewing the interest arbitration cap that has already saved property taxpayers nearly $600 million. That’s low-hanging fruit that’s proven to work, and we can pass it tomorrow if he’d give the Legislature the green light. That’s just one proposal of many that we know will work to lower the tax burden on New Jerseyans.”

Senator Dawn Marie Addiego (R-8) expressed concern that the Governor is offering little more than false hope to property taxpayers, and urged him to join in support of substantive reforms that would achieve real cost savings for taxpayers.

“Governor Murphy is providing false hope that has the potential to result in dire consequences for New Jersey families, including IRS tax audits and even criminal charges for tax evasion,” said Addiego. “I don’t want New Jersey taxpayers to assume the risk of having to defend the Governor’s ill-conceived plan. Our solutions to lower the cost of government represent a better and safer path forward. I sincerely hope Governor Murphy will get on board and join us in this thoughtful effort.”