U.S. Rep. Josh Gottheimer (D-5th Dist.) recently sat with members of the ROI-NJ editorial board. Here are just some of his comments.
ROI-NJ: The plan to set up charitable contribution loopholes (our words, not yours) to help New Jersey residents avoid being hit by the new tax laws that limit SALT (state and local tax) deductions seemingly took a big hit last week when the IRS sent out a memo reminding taxpayers that federal law, not municipalities, determine what is tax deductible. As a leader in the effort, are you ready to fight — and do you think New Jersey can win?
Josh Gottheimer: We can win. And we’ll win because the precedent is there. There is an IRS precedent, a legal precedent. There are 33 other states, mostly (Republican-leaning) red states, with a hundred-plus programs that have been utilizing these provisions for decades. It was in part in response to the last major tax reform in 1986.
As the IRS acting commissioner said to me, they are in a bit of pickle because they know if they try to strike down the actions we’ve taken here to fight back against gutting SALT to get tax cuts for people, they are going to have to do it in the other 33 states. You can’t just pick New Jersey and go after us. You have to take it away from the other states.
The IRS is going to have to pick up the phone and call those red state governors and tell them they are taking away tax relief from their citizens.
I knew they were going to fight it; they told me they are going to fight it. I’m not surprised by that. Let’s go to court and let’s win this — I believe we will.
ROI: If this concept has been used by so many other states for such a long period of time, why hasn’t New Jersey used it before?
JG: I was shocked when we were developing this idea for New Jersey to find out how many states have been utilizing the provision for decades and we haven’t been. As a taxpayer, I was beyond frustrated to learn that we weren’t getting relief that we could have been getting.
ROI: Let’s be honest. This isn’t really a charitable deduction. It’s a way to avoid paying taxes that federal law now says people need to pay. What do you say to people who say you are just trying to game the system?
JG: You pay the taxes you need to pay, but you don’t ever pay extra. There’s a reason why every business in America has accountants who make sure they pay what they need to and not a penny more. If there’s a tax deduction you can take, you take it.
After this tax bill passed, you know businesses hired accountants to find every tax break they could take. Why (wouldn’t New Jersey) do the same thing? There’s no difference. We’re looking for everything that’s on the books, that’s legal and legitimate, that we can use to save people money. I feel this is one way to fight back.
ROI: There’s another way to avoid the penalty that comes with having SALT taxes over the $10,000 mark — you make sure everyone’s local taxes do not exceed $10,000. Some have suggested this should be a wakeup call for the state to begin making hard choices on shared services and other things that will reduce local taxes. Where do you stand on that idea?
JG: We should be having a conversation about how we’re going to make sure that we should be more fiscally responsible. That means we’re going to have to make some tough decisions, and I think that means we have to get our fiscal house in order.
I think we have to be smart about how we utilize the resources we do have. We’ve got to clean up our infrastructure. We can’t have a third of our bridges considered unsafe and have the eighth-worst roads in the country. You can’t grow an economy this way. I think we need to look at some of those overburdensome regulations that are not about clean air and clean water, but just about giving businesses a hard time.
ROI: Let’s talk business. And business owners. They are fed up, too. And they don’t feel like they are getting relief from government. How can government help them?
JG: We should be calling businesses up and thanking them and asking them, ‘What else can we do for you to get you to stay, grow or come here?’ I think we have a responsibility as a state, and I think more people in positions such as mine should be making those phone calls and asking, ‘What else do you need?’ They are all vulnerable to getting picked off by other states, and we better stand by our business and our jobs now more than ever. We need a plan.
ROI: Give us your plan.
JG: More public-private partnerships where businesses work with community colleges and vocational schools to get the workers we need for the future and to give students a reason to stay here. Instead of talking about it, we need to do something about it.
We are failing here. We have to cut the red tape and make us more business friendly.
ROI: Of course, you’re based in Washington, not New Jersey. Why are you so passionate about solving local business issues?
JG: I just believe that’s the job. The job is to solve problems for people. It can be as simple as filling a pothole. If someone calls my office about a pothole, we make the calls to get it filled. We don’t give them a number and ask them to call. That’s the job.
Everyone who is in public service should be helping to create economic opportunity wherever we can by supporting the private sector and doing everything possible to provide the ingredients for growth.