New Jersey’s Ultra-Rich Get Less Take-Home Pay Under Higher Tax

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By Leslie A. Pappas

Employers of those who make more than $5 million a year in New Jersey should increase withholding by 74 percent no later than Sept. 1 to help their employees catch up on a year’s worth of higher taxes.

Individuals who earn $5 million or more in New Jersey will pay a 10.75 percent gross income tax under recent changes to the state’s tax code, up from 8.97 percent.

Employers should withhold 15.6 percent in gross income tax because the new rate will be applied retroactively beginning Jan. 1, 2018.

The Division of Taxation won’t impose interest or penalties for estimated tax payments or withholding that falls short before Sept. 1 as a result of the new multimillionaire tax rate, the division said in guidance dated July 23.

The multimillionaire tax is part of New Jersey’s $37.4 billion fiscal 2019 budget, which also increased corporate business taxes, instituted mandatory unitary combined reporting, added a 50-cent charge on ride-sharing services by companies such as Lyft Inc. and Uber Technologies Inc., and slapped a sales tax on short-term home stays booked through companies such as Airbnb Inc.

Murphy signed the budget legislation July 1.

The state expects to pull in about $280 million more by increasing taxes on the ultra-rich, Division of Taxation spokeswoman Jennifer Sciortino told Bloomberg Tax. About 1,800 full-year residents and another 6,200 nonresidents will be affected, she said.

For tax purposes, nonresidents are individuals who live outside the state but who earn income or own a home in New Jersey, according to guidance from the state’s treasury department.

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at lpappas@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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