New Jersey Businesses Win Under New Tax Bill, But Workers May Lose on Personal Returns
by Josh Anderson
JERSEY, CITY — With good reason, New Jersey is known nationally as a state that is ripe for and welcoming to new investment in many sectors. From retail to multi-family to data center markets, the proximity of the Garden State to New York City as well as its central position within the most densely populated region in the United States bodes well for developers and prospectors looking for upwardly mobile renters & buyers, educated workers, and more eyeballs to consume content or data. However, the tax overhaul recently passed by the House of Representatives contains some elements that could potentially tarnish New Jersey’s reputation as an ideal destination to start a business or infuse your money.
Any bill that impacts such a large portion of our economy will feature both winners and losers. And indeed, many New Jersey residents will benefit from the bill. Pass-through entity deductions will be lowered substantially, meaning that investors in the “flipping” game — an arena worth a sizeable chunk of change in New Jersey — will enjoy monetary gains, and this is likely to result in increased property values across many sectors. This could perhaps lead to new renovations and restorations in the adaptive re-use arena. However, at the same time, mortgage deductions will be decreased, which will not go unnoticed in a state known for the pricey cost of homes.
New Jersey is also known as a “high-tax” state. Residents of the state pay more in state and local taxes as well as property taxes than the average United States taxpayer (in some cases double that figure), and the new tax bill will eliminate the ability of New Jerseyans to deduct the former from their federal tax bill, while capping the amount of the latter they can deduct to $10,000. The average property tax deduction in New Jersey comes to $9,500 — meaning that it’s not uncommon for an annual property tax bill to exceed this number.
NJTV recently reported how the average residential tax in four New Jersey municipalities will fare:
- Tavistock residents, who pay $31,132 on average in property taxes, are set to lose $21,132
- Millburn residents, who pay $23,328 on average in property taxes, are set to lose $13,328
- Loch Arbour residents, who pay $22,476 on average in property taxes, are set to lose $12,476
- Alpine residents, who pay $20,0922 on average in property taxes, are set to lose $10,922
Recently, some New Jersey municipalities have tried to formulate creative solutions to mitigate these financial burdens. Paramus, Park Ridge, and Fair Lawn will allow residents to donate to their town the same amount they would have been charged in property taxes. The money will go toward municipal services and will count as a charitable donation (which still has no tax deduction limits).
“The tax hike bill Congress passed last year is a ticking time bomb for New Jersey,” said Representative Josh Gottheimer, a Northern New Jersey Democrat who helped to formulate the plan, since his district includes the trio of towns. “But today, we are proudly declaring that New Jersey won’t shy from a fight. We won’t be America’s piggy bank.” Incoming Phil Murphy has said he is similarly dedicated to shielding New Jersey taxpayers from higher tax bills.
When it comes to the effect on property values, Moody Analytics released damning findings. “No one gets creamed more than New Jersey from this tax bill,” said Mark Zandi, chief economist for Moody’s Analytics in a piece for the New York Times about the effect of the bill on Livingston, where many high-worth residents worry that their American Dream of a comfortable suburban life will be threatened. “It’s going to put really severe fiscal pressure on local governments, and they’re going to be between a rock and a hard place,” Mr. Zandi said.
All these considered, many New Jersey firms are rejoicing at the tax bill. Unity Bank of Clinton announced that they would give 200 employees a $750 bonus. OceanFirst Bank will now pay a $15 hourly wage to employees. Comcast will provide $1000 bonuses to over 100,000 employees. Prudential announced stock buybacks worth $1.5 Billion, while Honeywell will increase its stock repurchase program by $6.5 billion.