Lawmakers Weigh Tax Schemes in the Garden State
July 2, 2012
New Jersey doesn't have the best reputation when it comes to taxes. Not only did the Garden State rank 50th in the 2012 State Business Tax Climate Index, its citizens also have the highest total tax burden in the country. Further, the state had the highest per capita property tax collection in 2009 and has been ranked as one of the top five states with the worst individual tax burden since 1977, say Scott Drenkard and Elizabeth Malm of the Tax Foundation.
To address this issue, members of the state's government have outlined three plans to reform the state's tax policy. The first, advocated by New Jersey Governor Chris Christie, would implement across-the-board income tax cuts.
- The governor's plan would implement a 10 percent reduction in the income tax rate for all tax brackets, to be implemented gradually over a four year period.
- The plan would also allow for an expanded Earned Income Tax Credit, which would be increased from its current rate of 20 percent of the federal credit to a new rate of 25 percent.
- Essentially, this plan would allow for proportional tax relief for all New Jersey taxpayers.
The two plans written by the state's legislature, however, would target tax relief toward those with lower incomes. The two plans written by the state's Senate and Assembly are nearly the same and would create tax breaks funded by higher taxes on high-income residents.
- The Senate Bill S. 10 would implement a homeowner income tax credit of 10 percent on property tax bills up to $10,000.
- This bill would also have a phase-in period of four years and would be limited to annual incomes of $250,000 and under.
- These breaks would be funded by a "millionaires' tax" -- a new tax bracket for those earning more than $1,000,000, increased to 10.75 percent under the Assembly bill.
Advocates of the governor's plan argue that by offering proportional benefits to all taxpayers, it is the most equitable form of tax relief, while Democrats within the legislature retort that high-income individuals should not receive as much tax relief, emphasizing their targeted breaks for middle- and low-income residents.
Source: Scott Drenkard and Elizabeth Malm, "Lawmakers Weigh Tax Schemes in the Garden State," Tax Foundation, June 12, 2012.
Browse more articles on Tax and Spending Issues