Residents are being pushed into higher tax brackets, sponsors say
BY: NIKITA BIRYUKOV – New Jersey Monitor
A Senate panel will weigh tying New Jersey’s income tax brackets to inflation next week, giving fresh air to a tax cut proposal that has remained stalled for more than a decade.
The proposal that will come before the Senate Budget Committee on Monday would require the Division of Taxation to annually adjust New Jersey’s tax brackets to track with the Consumer Price Index. The change would be costly — it would cut tax collections by hundreds of millions of dollars each year — but it’s one Republicans say is sorely needed as surging inflation cuts into the buying power of taxpayers’ income.
“Our low and middle-income folks need this now more than ever,” said Sen. Tony Bucco (R-Morris), the bill’s prime sponsor. “They do it at the federal level, and there’s no reason we shouldn’t give that same benefit and that same tax break to our residents here in New Jersey.”
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New Jersey’s income tax is paid under a series of marginal rates that grow with a filer’s income, topping out at 10.75% for income that exceeds $1 million.
At present, the state’s tax brackets only move when lawmakers approve changes to the state’s tax code.
Though the Legislature approved the creation of a new tax bracket for multi-millionaires — and later millionaires — during Gov. Phil Murphy’s first term, the state’s tax brackets for earners in lower bands have not moved since temporary tax hikes put in place by Gov. Jon Corzine that expired in 2009.
If you don’t tie tax brackets to inflation, proponents of the move argue, they capture filers they weren’t intended to. In 1996, the 6.37% bracket for $75,000 in income was intended for income that in today’s dollars translates to $136,568.
That so-called “bracket creep” is what the sponsors want to avoid.
