New Jersey Real Estate Report

From NJ Spotlight:

SWEENEY FORGES AHEAD WITH STATE TAX POLICY REVIEW, NO INPUT FROM MURPHY TEAM

Major changes to the federal tax code recently enacted in Washington, D.C. may have significant and unexpected impact on the state economy, according to state lawmakers — particularly in a high-cost place like New Jersey. That’s why Senate President Steve Sweeney has ordered a broad review of the state’s entire tax and fiscal policy landscape, and he’s named well-known outside policy experts to participate.

Sweeney (D-Gloucester) yesterday named two dozen members of a special working group, made up of both lawmakers and these experts; they’ve been charged with coming up with ways to help New Jersey deal with any economic challenges the federal tax-code overhaul poses.

But that’s not all. Other areas will be subject to the group’s discussions, which will primarily only be held in private, according to Sweeney’s announcement. The group will look at everything from how New Jersey funds local schools and other government services, to what can be done to control high property taxes and stop residents from leaving the state for cheaper alternatives.

The effort will be led by state Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex), and Assemblyman Lou Greenwald (D-Camden). In addition to several other lawmakers from both parties, the working group also will include more than a dozen outside policy experts, including economist Mark Zandi of Moody’s Analytics and former state Treasurer Feather O’Connor Houstoun.

The formation of the working group comes just weeks before Gov. Phil Murphy is expected to put forward his first state budget message to a joint session of the Legislature. It also comes as Murphy and Sweeney have publicly disagreed about whether the new governor should go forward immediately with his plan to hike New Jersey’s top-end income tax rate on earnings over $1 million to bring in more revenue to fund core priorities like K-12 education and public-employee pensions.

In fact, such working groups are usually organized by governors, and noticeably absent from the panel assembled by Sweeney — who once considered running for governor himself — is a member of Murphy’s administration. It remains to be seen exactly how receptive the governor will be to any of the group’s findings once they are released; Murphy’s press secretary did not respond to requests for comment yesterday.
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Sarlo stressed that this new effort is putting “everything on the table,” and Greenwald promised it would not be just an “academic exercise.” Oroho suggested the group’s eventual policy proposals would help the state deal with a potential crisis.

“We are facing a crisis — a crisis of competitiveness, a crisis in housing values, and a crisis that undermines our prospects for future economic growth,” Oroho said.

In addition to Zandi and Houstoun, the experts from outside the Legislature are Dr. Joel Naroff, Naroff Economic Advisers Inc.; Dr. Michael Lahr, Rutgers Economic Advisory Service; Dr. Ray Caprio and Marc Pfeiffer, Rutgers Local Government Research Center; Richard Keevey, Rutgers University Bloustein School of Planning & Public Policy, and Princeton University’s Woodrow Wilson School; Dr. Henry Coleman, Rutgers University Bloustein School of Planning & Public Policy; Dr. Donald Moliver and Peter Reinhart, Monmouth University’s Kislak Real Estate Institute; Dr. Spencer Levy, CBRE Group Inc.; Ralph Thomas, New Jersey Society of Certified Public Accountants; Frank Chin and Ray Kljajic, American Public Infrastructure Inc.; Kurt Stroemel, H&RHS Financial Services; and Jerry Maginnis, accounting executive in residence at Rowan University.
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“Blowing up the system, and putting it back together in a way that makes it work better, requires total discussion amongst people that can speak freely, and not be concerned that they’re going to be criticized until we get a product done,” Sweeney said.

From the Star Ledger:

Here’s how N.J. lawmakers propose to save your property tax break

The state Senate began its work Thursday devising a way to prevent New Jersey taxpayers from losing a popular property tax break as a result of federal income tax reform.

Following the mold of other high-tax states looking to skirt the new $10,000 cap on state and local tax deductions taxpayers can claim, the state Senate Budget and Appropriations Committee advanced a bill allowing municipalities to set up charitable funds to substitute donations for property tax payments.

Under the scheme, taxpayers would make donations to the charitable fund and receive a credit against their property tax bill. They could in turn claim the payment as a charitable contribution, which is not subject to a cap.

It’s a maneuver championed by Gov. Phil Murphy, a Democrat who urged the Democratic-controlled state Legislature to act.

While local officials don’t have to wait for the state to pass a law before establishing charitable support funds, Murphy said he believed they would be on stronger footing with it.

The bill would give property owners a 90 percent tax credit — ostensibly to stand up to IRS scrutiny — for their contribution to the town, county or school district’s charitable support fund. And if an owner’s tax credits exceed their net property taxes owed, the fund would roll the credits forward for up to five years.
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State Sen. Steve Oroho, R-Sussex, warned state lawmakers may be sending taxpayers down a risky path, as it’s unclear whether the Internal Revenue Service will bless these moves, which resemble a quid pro quo.

“The way the charitable contributions work is you’ve got to give something and get nothing in return,” Oroho said. “I’m not really sure how we can argue that you’re not getting anything in return.”

In fact, U.S. Treasury Secretary Steven Mnuchin last month called the idea, also considered by California, “ridiculous.”