New Jerseyans fearing negative effects from the new federal tax overhaul may have the chance to donate their property taxes to the state and still take the write off on their tax bill.
Incoming Democratic Gov. Phil Murphy and Democratic Reps. Josh Gottheimer and Bill Pascrell floated the idea at an event on Friday.
Under the Republican-sponsored law, which President Donald Trump recently signed, state and local tax deductions on federal returns are capped at $10,000.
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That's an issue because New Jersey has the highest property taxes in the country, and roughly two out of five tax claim state and local tax deductions.
Under the proposal, the state would create or identify funds that would pay for local services like schools and law enforcement. Taxpayers would pay the amount of their property taxes to those funds. Since the payments would be classified as charitable contributions, they can be deducted on federal returns.
The state would then offer a corresponding tax credit to cover a homeowner's tax bill.
Murphy said 22 states have similar programs in some capacity.
Kim Rueben, a senior fellow at the liberal-leaning Urban-Brookings Tax Policy Center, said it remains to be seen whether the IRS would allow deductions for that kind of contribution if it's rewarded with tax credits. There is some precedent for it, though: She noted that some states give tax credits in return for private-school scholarships and that the IRS allows deductions of those contributions.