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Gov. Phil Murphy. announces an agreement with legislative leaders to pass a millionaires tax and a middle-class tax rebate in September 2020. (Photo: Office of the Governor.)

SALT or infrastructure? Murphy insists on both

By Joey Fox, September 27 2021 4:09 pm

Asked at his twice-a-week Covid briefing today whether he would support a federal reconciliation and infrastructure package if it didn’t lift the cap on the State and Local Tax (SALT) deduction, Gov. Phil Murphy demurred and pledged to fight for both.

“On behalf of New Jersey, I’m a pig, I want it both ways,” he said. “I want the infrastructure money and I want the SALT cap lifted. And I will keep fighting until we get both.”

The 2017 Tax Cuts and Jobs Act passed under the Trump administration instated the SALT deduction cap, which limits the amount that taxpayers in high-tax states can deduct on their annual tax return. In the four years since, many suburban New Jersey members of Congress have fought to repeal the cap, and earlier this month four of them declared that their reconciliation votes are dependent on reinstating the full SALT deduction.

“It’s the single biggest tax increase on the middle class in the history of our state,” Murphy said of the SALT cap. “And it was political – it was the Trump administration, it was directed at states like ours, and we’re not going to quit until we get it lifted.”

Many progressives, however, have cited studies showing that removing the SALT cap would almost exclusively benefit wealthy households. A study released just today from the left-leaning think tank New Jersey Policy Perspective, for example, found that the Biden plan’s tax proposals would only make the country’s tax code more equitable if the SALT cap remains in place.

As the titular head of the state Democratic Party, Murphy has considerable sway even in cases where he has no direct power to shape legislation. But his refusal to prioritize reconciliation or the SALT cap indicates that, at least in public settings, he won’t be providing New Jersey’s 12 Democratic members of Congress with a clear roadmap of how to proceed.

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