As President Obama prepares to roll out another tax increase proposal targeting capital gains and dividends, it’s instructive to look at what happened the last time he did that. Fortunately, the IRS just released...
- The Tax Policy Blog
- New Jersey Budget Avoids Harmful Temporary Tax Hikes, All...
New Jersey Budget Avoids Harmful Temporary Tax Hikes, Allows For State “Amazon Tax”
Last week, Governor Chris Christie signed into law a $32.5 billion state budget for New Jersey – but not before using his line-item veto to cut back significantly on scheduled pension payments and strike down a pair of temporary tax increases.
The package of budget bills that originally landed on Christie’s desk included a millionaires’ tax that would have raised the marginal tax rate for income exceeding $1 million from 8.97 percent to 10.75 for the next three years (A3485). This summer marks the fourth time in five years that the Governor has vetoed the measure – a sensible move, considering the tax’s potential negative effects on New Jersey businesses, economic growth, and regional competitiveness.
The Democratic Legislature also sought to implement a one-year surcharge of 15 percent to the state’s corporate tax rate that would have effectively increased the rate from 9 percent to 10.35 percent for 2015 (A3484). Had Christie not vetoed the increase, Garden State corporations would have temporarily faced the highest corporate tax rate in the Northeast and second-highest in the nation.
Although the Governor held firm on his promise to reject any major direct tax increase on New Jerseyans, he did so with one caveat – the creation of a “click-through nexus” tax, which requires out-of-state online retailers selling to in-state consumers to pay the New Jersey sales tax (provided that their cumulative receipts on New Jersey sales exceed $10,000 for the last four quarters). These are often nicknamed “Amazon taxes” after their most obvious target. Although New York’s highest court upheld a similar law last year, legal challenges to click-through nexus laws continue to mount.
Many states assume that taxing Internet sales will capture a new, substantial stream of revenue to supplement existing consumption taxes. But collections data shows that these taxes tend to generate far less revenue than expected, especially in the short-term.
The bill containing the click-through nexus tax also included a few other provisions meant to bring in additional state revenue, including closing “a loophole that allows out-of-state partners in New Jersey partnerships to be eligible for tax refunds,” and adjusting the definition of both operational income and net operating losses for New Jersey corporations.
Subscribe to the Tax Foundation Newsletter
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.