Key Takeaways:
- Rep. Mikie Sherrill (D-N.J.) suggested New Jersey should consider withholding federal tax payments as a “last resort.”
- The controversial proposal is a response to the potential extension of the $10,000 cap on state and local tax (SALT) deductions.
- The SALT cap, enacted in 2017, disproportionately affects residents in high-tax states like New Jersey, New York, and California.
- Sherrill argued the measure would be a way to prevent New Jersey from being treated like “the piggy bank for the rest of the country.”
U.S. Rep. Mikie Sherrill sparked a heated debate this week by floating a radical idea: what if New Jersey simply stopped paying its federal taxes? The proposal, made during a tele-town hall, was presented as a potential last-ditch effort to fight back against federal tax policies that she argues unfairly penalize her constituents.
The Fight Over SALT
At the heart of the issue is the $10,000 cap on the state and local tax (SALT) deduction, which was implemented as part of the Trump administration’s 2017 tax cuts. This cap limits the amount of state and local taxes that households can deduct from their federal income taxes.
In high-tax states like New Jersey, where property and income taxes often exceed that limit, the cap has resulted in significantly higher federal tax bills for many middle-class families. The provision is set to expire at the end of 2025, but Sherrill raised concerns that a potential Republican-led government could extend it.
A “Last Resort” Threat
During the call, Sherrill laid out a confrontational scenario in response to the potential extension of the cap.
“We have to be prepared to fight back,” she stated, adding that New Jersey should explore “what it would look like if we were to withhold federal taxes from the federal government.”
Sherrill framed the suggestion as a “last resort,” emphasizing the need for leverage in tax policy negotiations. She argued that for too long, New Jersey has been treated as “the piggy bank for the rest of the country,” sending more money to Washington, D.C., than it receives in federal funding. Withholding tax payments, she suggested, would be a powerful way to demand fairer treatment.
A Controversial Standoff
The idea of a state refusing to remit federal taxes would likely trigger a significant constitutional and legal battle. However, the statement underscores the deep frustration among lawmakers in “blue” states over the SALT cap.
For years, a bipartisan group of legislators from high-tax states has fought to repeal the cap, arguing it amounts to double taxation and was politically motivated to harm states with Democratic leadership. As the 2025 expiration date looms, Sherrill’s comments signal that the political fight over the SALT deduction is far from over and could escalate dramatically.