A left-leaning think tank called for state officials to rewrite New Jersey’s income tax structure, proposing tax increases on residents who earn more than $250,000 a year earlier this week. A New Jersey Policy Perspective (NJPP) said in a new report that if the state added four tax brackets and increased rates on the wealthiest households, it would generate more than $1 billion in new revenue every year. NJPP said the bulk of the $1 billion, or about 85 percent, would be paid by the state’s top 1 percent.
NJPP argues the changes are needed to address the State’s monumental fiscal problems. The state’s budget has become increasingly strained, and the pension system is dramatically underfunded. These factors led to the state experiencing 11 credit downgrades.
According to NJPP, the top 5 percent of New Jersey’s households have average incomes that are 15.6 times larger than the lowest 20 percent of the state’s households. The proposed reforms would make the state’s tax system more equitable, but low-income and middle-class New Jerseyans would still pay larger portions of their incomes in state and local taxes than wealthy residents, NJPP says.
NJPP is calling for new brackets at $250,000, $750,000, $1 million and $2.5 million, and a slight tax increase for the $500,000 bracket. Currently, households making between $250,000 and $500,000 are taxed at a rate of 6.37 percent. NJPP is proposing the rate increase to 7 percent. NJPP is calling for the following changes: 9 percent for households making between $500,000 and $750,000; 10 percent for households earning between $750,000 and $1 million; 10.75 percent for households making between $1 million and $2.5 million; and 11 percent for households making $2.5 million and up.