WASHINGTON — U.S. Sen. Robert Menendez challenged President Donald Trump’s treasury secretary over an Internal Revenue Service ruling limiting New Jerseyans’ ability to deduct prepaid property taxes.
Menendez, D-N.J., used his time at a Senate Finance Committee to grill Treasury Secretary Steven Mnuchin over an Internal Revenue Service ruling limiting homeowners to deducting only the 2018 property taxes paid in response to an they already had received, not an estimate of what they would owe.
Companies, on the other hand, could deduct promised employee bonuses in 2017 even though they won’t be paid out until 2018.
“If it’s good enough for corporations to be able to make a deduction in a year in which didn’t even pay it, taxpayers should be able to make a deduction in the year in which they did pay it,” Menendez said. “It’s just a question of fairness and justice.”
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Homeowners in New Jersey and other high-tax states rushed to prepay their 2018 property taxes in advance of the new Republican tax law, which sharply curbs their ability write their for state and local taxes off of their federal returns.
The tax bill took aim at a deduction disproportionately used by New Jersey and other Democratic-leaning states that send billions of dollars more to Washington than they receive in services, even as it increased the federal deficit by $1.5 trillion over 10 years and gave most of its benefits to corporations and wealthy Americans.
Mnuchin insisted that the IRS ruling was consistent with federal tax law.
Reps. Leonard Lance, R-7th Dist., and Josh Gottheimer, D-5th Dist., have introduced legiuslation to overturn the IRS ruling, and Menendez on Wednesday called the decision “fundamentally flawed.”
“By deducting in 2017, corporations — to use your words Mr. Secretary — can ‘game the system’ and claim an even larger deduction in 2017 without spending a dime,” Menendez said.
“But in contrast, a middle-class family that actually paid their property taxes in 2017 won’t be able to deduct them in the year that they paid, which to me is blatant hypocrisy, and would be shocking if it didn’t so neatly fit into the pattern of an administration that puts corporations on Wall Street above the people who live on Main Street,” he said.
While the Republican bill banned the deduction of prepaid income taxes, it said nothing about property taxes. As a result, Menendez insisted that, contrary to the IRS ruling, all property taxes should be deductible in the year they were paid.
“Clearly, we should be allowed to permit the deduction of property taxes when they are paid,” Menendez said. “We’re not abusing the system. The system is abusing us.”
Jonathan D. Salant may be reached at email@example.com. Follow him on Twitter @JDSalant or on Facebook. Find NJ.com Politics on Facebook.