Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
New Jersey would collect $1 billion more in annual income tax revenue by raising rates for the top 5 percent of the state’s earners, a liberal think tank said.
The state hasn’t raised its top marginal rate of 8.97 percent on incomes above $500,000 since 2004, except for a one-year surcharge enacted after the 2008-09 recession that was allowed to lapse in 2010, according to a Sept. 12 report by the New Jersey Policy Perspective (NJPP). Vetoes by Gov. Chris Christie (R) have blocked any increases since then.
The proposal is likely to carry more weight as Christie prepares to leave office after eight years, to be succeeded in January 2018 by either Lt. Gov. Kim Guadagno (R) or Phil Murphy, a retired Goldman Sachs executive who served as ambassador to Germany under President Barack Obama and is the Democratic nominee.
The addition of four new income brackets to the highest earners would be modeled on a plan California adopted in 2013, the NJPP said.
It would also be consistent with a new top marginal bracket Maine adopted in 2016 for incomes higher than $200,000 and a Massachusetts ballot initiative slated for November 2018 to amend the state constitution for a tax hike on incomes higher than $1 million.
Opposition to income tax increases in New Jersey, the NJPP report said, has “prevented the tax code from keeping up with the times” and deprived the state “of resources needed to build widely shared prosperity.”
The proposal would add new brackets at the $250,000, $750,000, $1 million, and $2.5 million income levels and also raise rates slightly for incomes over the $500,000 threshold. It would raise $1 billion for education, aid to cities and towns, and property tax relief, while costing the state’s top 5 percent households $674 million, after federal deductions, the group said.
“The tax increase would be paid almost exclusively by New Jersey’s ultra-wealthy, with the top 1 percent—households with average annual incomes of $3 million—paying 85 percent,” according to the report.
The share of total state and local tax paid by the top 1 percent in New Jersey would rise to 7.7 percent from 7.1 percent, but that share would still be smaller than for any other income level, the group said.
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