Ralph Thomas, the CEO of the New Jersey Society of CPAs, can easily rattle off what he calls a three-legged stool of tax changes and challenges that will come with President Joe Biden’s administration:
- The SALT tax issue;
- The Trump tax cut issue;
- The should-you-pay-taxes-in-New-York-if-you-now-work-in-New-Jersey issue.
But, a few minutes after Biden took the oath of office Wednesday — and hours before the new president began signing some of the long list of executive orders that are said to be waiting for him in the Oval Office — Thomas said he couldn’t help but think about what else might be out there.
When it comes to taxes, Thomas said, there’s always something else out there.
“Whenever there’s a change in administrations, there’s always plenty of change, we know that,” he said. “What we’re concerned about is what we haven’t heard about before.
“What’s being kept under the covers that we don’t know about — and then how do you react to that.”
In New Jersey, Thomas said, the concern always is about affordability.
“What will the impact be on keeping folks in New Jersey, because that’s always been a big concern of ours — the outward migration that takes place,” he said. “If there are significant increases in taxes, we could see a significant increase in the number of people that are going to be leaving the state.”
Thomas is a realist. He knows taxes are going to go up under a Democratic president, as opposed to under his predecessor, Republican President Donald Trump. Including taxes on businesses.
“The hope is that they aren’t raised too significantly,” he said. “I think the top corporate tax rate, currently at 21%, could rise to 28%. That’s the first thing. And then, what else is going to be in Biden’s plan in terms of federal taxes, including on the wealthy and on capital gains.”
Of course, not all tax changes are necessarily bad. Some could help. And help in a big way.
Eliminating — or significantly raising — the amount of state and local taxes that can be deducted, the so-called SALT tax, could go a long way to help New Jerseyans. This could be done easily, Thomas said.
Democrats have indicated they are eager to adjust this. Thomas said the big question is the timing.
“Obviously, we’d love for them to deal with it right away, but, to be realistic, it probably won’t be one of the things that the Biden administration deals with right out of the box,” he said.
Another quick fix would be guidance on the Paycheck Protection Program.
“Is that money going to be taxable?” Thomas said.
Long-term is the question of stay-at-home work. Thomas said his organization is carefully watching the lawsuit New Hampshire has filed against Massachusetts, saying its now work-from-home workers should no longer have to pay those out-of-state taxes. New Jersey, which joined the case, would love to see the tax windfall that would come with a ruling that would come from the U.S. Supreme Court.
Of course, that ruling isn’t expected any time soon.
New taxes? That’s something Thomas said is more likely to come soon. Just how much is the question.
“It’s unrealistic to say that things are going to be business as usual,” he said. “There are going to be changes. It’s just a question of the amount of change that is going to take place under this new administration.”