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NJ Congressman Gottheimer: Trump Tax Bill Will Make Home Prices Plunge

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By    |   Wednesday, 06 Dec 2017 10:08 AM

The Republican tax reform plan will "kill" property values in New Jersey and raise taxes, Rep. Josh Gottheimer, D-N.J., reportedly is predicting.

While he supports tax cuts, Gottheimer said he has an issue with the changes to state and local tax deductions.

"This is an assault on New Jersey, another nail in our coffin," he told CNBC.

To be sure, billionaire an dinvestment guru Ray Dalio agrees with Gottheimer.

The expected elimination of state and local income-tax deductibility proposed by lawmakers will take a toll on high-tax areas due to lower revenues as high-income earners move out of state, Bloomberg reported.

That’s going to exacerbate the polarity and conflict that’s already prevalent among wealthy and lower-income U.S. taxpayers, who have “typically different values.” The proposed tax incentives will push the rich toward states with lower levies, like Florida, Texas, Nevada, Washington and Arizona, Dalio wrote in a LinkedIn post Tuesday.

Those left behind in high-tax states will see a hit in their property values, while “the reduced population of higher income and higher spending folks leads to reduced spending in these locations,” further depressing their economies, said Dalio, who runs the world’s biggest hedge fund at Bridgewater Associates.

Dalio's firm is based in Connecticut, one of the high-tax states cited in the post.

The House and Senate are poised to begin working this week on compromise tax-overhaul legislation. The Senate bill mirrors the House legislation by calling for the repeal of state and local tax deductions, while allowing up to $10,000 for property tax deductions.

According to a study by the Tax Policy Center, 7 percent of taxpayers would pay more tax in 2019, 10 percent in 2025, and 48 percent in 2027, compared to current law. On average in 2027, taxes would change little for lower- and middle-income groups and decrease for higher-income groups.

On its face, ending so-called SALT deductibility will increase the effective tax rate for high earners in high-tax states by 3 percent to 5 percent, with 1 percent to 2.5 percent of them migrating out of state, he said. State tax revenues will fall about 1 percent, Dalio said. His estimates understate the overall impact from the changes as they don’t account for consequences on real-estate prices and living conditions, he said.

States like New York, New Jersey and California, which have higher than average incomes and taxes, are the most vulnerable -- especially because of the concentration of wealth among high-income earners. For example, more than 30 percent of the taxes in New York, New Jersey, and California come from those making $500,000 or more, and in those states, high-earning taxpayers are a small portion of the population, according to the post.

Otherwise, Gottheimer thinks the plan, which he called a "tax hike on New Jersey," will send jobs, people and businesses fleeing the state and will cause housing prices to plummet.

"People are calling our office off the hook," he said. "They think property values will go down somewhere between 15 and 20 percent," he said.

"It also resets what you can suddenly afford every year," he said.

However, in the same CNBC video segment, economic guru and former Trump adviser Larry Kudlow disagreed that the tax-reform plan will only be harmful to homeowners.

“You are going to get a huge housing mortgage deduction. Last I heard, I don't know if it is moving around, you are going to get up to a million dollars, if you have a loan of a million dollars you can deduct all the interests,” said Kudlow, a Newsmax Finance Insider, radio talk-show host and CNBC senior contributor explained.

Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985, said since he also lives in the same area, he also does have concerns.

“I am sympathetic to this. I am from the metropolitan area and a lot of good Republicans are friends of mine” are also, said the radio host of "The Larry Kudlow Show" and author of "JFK and the Reagan Revolution: A Secret History of American Prosperity," written with Brian Domitrovic and published by Portfolio.

New Jersey property taxes are “out of control,” said Kudlow, who served as the Trump campaign's senior economic adviser.

Kudlow also said he thought there could have been other tax tactics for the GOP to pursue.

“This could have been done elegantly if we have lowered the personal tax rate which is really true of tax reform,” he said.

“I think you will see an investment and business boom,” Kudlow predicted.

(Newsmax wire services contributed to this report).

© 2017 Newsmax Finance. All rights reserved.

   
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The Republican tax reform plan will "kill" property values in New Jersey and raise taxes, Rep. Josh Gottheimer, D-N.J., reportedly is predicting.
trump, tax, home, prices, gottheimer
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2017-08-06
Wednesday, 06 Dec 2017 10:08 AM
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