NJPP REPORT: Road to Recovery: Reforming New Jersey’s Income Tax
NJPP REPORT: Road to Recovery: Reforming New Jersey’s Income Tax
June 9, 2020 – By raising the income tax on New Jersey’s wealthiest households, the state could raise over $1.5 billion to support the COVID-19 recovery, according to a new report by New Jersey Policy Perspective (NJPP). The report finds that New Jersey’s income tax code is outdated, inadequate, and unfair, and that reform is necessary to stabilize the state’s finances and prevent damaging cuts to public services that communities rely on.
The report, Road to Recovery: Reforming New Jersey’s Income Tax Code, proposes targeted changes to the income tax rates paid by the state’s wealthiest households. Specifically, the proposal calls for the creation of new tax brackets at $250,000 and $1 million, and slightly increasing the tax rate at the existing $500,000 and $5 million brackets.
“New Jersey’s recovery from the COVID-19 pandemic will depend on the policy decisions made in the coming weeks and months,” said Sheila Reynertson, Senior Policy Analyst at New Jersey Policy Perspective and author of the report. “State lawmakers can either balance the budget with deep cuts that will harm our communities, or they can make sure the wealthiest among us pay their fair share. The current tax code puts middle-class and low-paid families at a disadvantage. The reforms outlined in this report will help fix that, while also providing the state with more resources to get us out of this downturn.”
Under the current tax code, New Jersey’s middle-class families pay a higher share of their income in state and local taxes than the state’s wealthiest 1 percent do, at 10.7 percent and 9.8 percent, respectively. The reforms outlined in the NJPP report would result in the top 1 percent of taxpayers paying 10.8 percent of their annual income in state and local taxes. The NJPP proposal would not change the income taxes paid by those who earn less than $250,000 per year.
The proposed reforms recognize that, just as tax policy choices are both a symptom of, and contributor to, broader racial and economic injustices, they can also be utilized to repair the damage done and advance racial equity. Due to the nation’s long history of racial segregation and discrimination, New Jersey’s Black and brown communities have been hardest hit by the economic fallout from the COVID-19 pandemic. They will also bear the brunt of potential cuts to the social safety net, should the state forego new revenue and try to once again cut its way out of the current economic downturn.
“The sustained protests against racial discrimination and police brutality against Black Americans have put state and local budgets in the spotlight,” Reynertson added. “Fixing the tax code is the best way for lawmakers to put into practice the values and priorities we hold as a state. This moment presents a big opportunity for New Jersey to advance racial equity and invest in the building blocks of a strong economy that works for everyone.”
New Jersey Policy Perspective (NJPP) is a nonpartisan think tank that drives policy change to advance economic, social, and racial justice through evidence-based, independent research, analysis, and advocacy.
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