Trump Tax Cuts: Win Or Loss For New Jersey?

NEWARK, NJ — There are plenty of political debates that are taking place in New Jersey as Donald Trump prepares to take over the U.S. presidency next week. This week, money has been making the news headlines, with Republicans seeking to renew the Trump tax cuts of 2017 – and Democrats blasting the idea as a “disaster for our country.”

On Wednesday, U.S. Sen. Cory Booker of New Jersey joined a group of other like-minded Democratic senators to protest a revival of the tax cuts, which will likely be one of the first issues that Trump tackles when he takes office on Jan. 20.

The 2017 Tax Cuts and Jobs Act made sweeping reforms to the federal tax code for businesses and residents, including slashing the corporate tax rate, changing tax brackets for individual taxpayers, and capping state and local tax (SALT) deductions at $10,000 – a controversial move in New Jersey, where property taxes are routinely among the highest in the nation.

Supporters of the Trump tax cuts argue that they have stimulated the economy and put money back in the wallets of U.S. taxpayers. But critics say the tax breaks overwhelmingly benefitted the wealthiest corporations and people in the nation, not blue-collar families, who are struggling more than ever.

Trump himself referenced the reforms in a social media post earlier this month.

“We must secure our border, unleash American energy, and renew the Trump tax cuts, which were the largest in history, but we will make it even better – no tax on tips,” the president-elect commented.

Many of the tax reforms that were created under the act will sunset at the end of 2025, although the corporate tax rate – which was reduced from 34 percent to 21 percent – is not set to expire.

Some GOP politicians are eager to make sure that the changes stay intact … and more.

Republicans in Congress have been searching for items to trim from the national budget to help defray the cost of Trump’s domestic agenda, including potential tax cuts.

Earlier this week, more than $5 trillion in potential spending cuts circulated by House Budget Republicans became public. The list of possible cuts includes heavy reductions to Medicaid, food stamps and other social welfare programs.

The news ignited a severe backlash from several Democratic lawmakers, including Sen. Booker, who decried the “Republican plans to pay for tax cuts for billionaires by dramatically cutting funding for Social Security, Medicare and other critical assistance.”

“Who are you for?” Booker questioned his peers on Wednesday. “Are you for working Americans – are you for American families – or are you for the wealthiest of the wealthy?”

Booker said he came to the Senate floor to listen to the arguments in favor of the Trump tax cut in “good faith.” He was told that they would pay for themselves – a mantra that Booker said he heard over and over.

However, independent agencies such as the Federal Reserve Board and the Joint Committee on Taxation have found that the massive corporate tax cuts that took place actually added trillions of dollars to the federal deficit, Booker said.

The vast majority of blue-collar workers – postal employees, cops, firefighters, plumbers, teachers – didn’t see a dime. But the wallets of the “top 1 percent” got much fatter, the senator said.

Watch footage of Booker’s speech here.

Booker, a Newark resident, isn’t the only Congress member from New Jersey that has commented on the Trump tax cuts this week.

Rep. Frank Pallone (NJ-6) said the SALT cap “hammered New Jersey retirees and homeowners” and created “handouts for billionaires.”

“New Jersey taxpayers remember who caused this mess,” Pallone commented Thursday.

IMPACTS ON TAXPAYERS

According to a recent analysis from the U.S. Treasury, the 2017 Trump tax cuts enacted “largely permanent” corporate tax cuts and “largely temporary” individual and estate tax cuts.

The individual and estate tax cuts are generally scheduled to expire at the end of 2025. If these tax cuts are extended, it would cost $4.2 trillion between 2026 and 2035.

All taxpayers in the U.S. would see a modest break, with the after-tax income for all families going down by an average of 2.2 percent. However, the largest tax cuts would go to the highest-income families, the Treasure Department said:

“The tax cut as a percent of after-tax income would be smaller than the average in every decile except the highest. Families between the 95th and 99th percentiles would receive a tax cut of 3.0 percent of after-tax income, families in the top 1 percent but not the top 0.1 percent would receive a tax cut of 3.6 percent of after-tax income, and families in the top 0.1 percent would receive a tax cut of 4.2 percent of after-tax income.”

IMPACTS ON BUSINESSES

Meanwhile, pro-business advocates say that if the tax cuts expire, it will be a drain on the economy – including in the Garden State.

Failing to preserve pro-business tax policies enacted as part of the 2017 federal tax reform will cost the U.S. economy nearly 6 million jobs, according to research released by the National Association of Manufacturers.

The manufacturing industry will bear the brunt of this economic damage, the group said, citing a report from global accounting firm Ernst & Young.

In New Jersey, which is home to more than 7,000 manufacturers, the impact could be substantial, with an estimated loss of $31.9 billion in economic output. In total, 162,000 Garden State jobs are at stake, according to the NAM.

Wealthy corporations aren’t the only businesses that benefitted from the tax cuts, other supporters say. A report from Republicans with the U.S. House Committee on Ways and Means said the 2017 Trump tax cuts provided a 20 percent small business deduction that set Main Street on a level playing field with larger corporations.

“As a result, small business investment in their communities and the creation of new jobs powered an economic boom under President Trump,” the report stated. “The looming expiration of this deduction threatens to roll back the clock, forcing business owners already burdened by the worst price spikes and interest rates in a generation, to consider which employees to lay off or facilities to close to pay higher taxes.”

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