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New Jersey is in Fact a High Tax State

3 min readBy: Justin Higginbottom

The New Jersey Policy Perspective aims to show that New Jersey is “not a high taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. state as assumed by many” here. I’ll first respond to a few of their bullet points:

  • New Jersey’s sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. is the state’s second largest revenue source

Only when ignoring local tax collections. And local tax collections are very important in New Jersey. The state collected $21.4 billion in 2007 from state and local property taxes—compared to $8.6 billion from general sales taxes. Out of states that rely most on property taxes, New Jersey ranked third. The state got 41.7% of its income from property taxes in 2007.

  • New Jersey is 32nd nationwide (highest) for sales tax collections per capita

Not by our numbers. Census data from 2008 for state general tax collections per capita gives New Jersey a rank of 8th highest in the country ($1,031 per person). Comparing state and local general and selective sales taxes in 2007 (most recent census data) gives New Jersey a rank of 22 ($1,424). New Jersey does not allow localities to levy their own sales tax which explains the lower national rank when including local sales tax collections. And for excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. rates, New Jersey has the 5th highest cigarette tax in the country at $2.70 a pack.

  • New Jersey’s 7 percent state sales tax rate is 31st in the nation.

No. New Jersey’s state sales tax rate—as of now—is 2nd highest in the nation; tied with Indiana, Rhode Island, and Tennessee. California is ranked 1st with 8.25%. Taking a weighted average (by population) of state and local sales tax rates for each state places New Jersey 19th highest; tied with Indiana, Mississippi, and Rhode Island.

But so far this is about New Jersey sales taxes. If arguing that New Jersey is not a high tax state then other taxes should be evaluated. How does New Jersey tax thee? Let me count the ways…

New Jersey has a monstrous 6 bracket income tax with the top rate at 8.97%. That top rate is the 6th highest in the country; tied with New York. While New Jersey does not have local sales taxes, it is possible to have local income taxes. Newark has a 1% tax on employee income. New Jersey is 6th highest (2008) for state income tax collections per capita and 8th highest (2007) for state and local income tax collections. Our State Business Climate Index, a measure of each state’s “tax-friendliness” toward business, ranks New Jersey 47th for individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. es.

New Jersey ranks 50th in property taxes on the Index. Property taxes on owner-occupied housing as a percentage of median home value in New Jersey is the 2nd (2008) highest in the country, and state and local property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. collections per capita there ranks 1st (2007). Six of the top ten counties that pay the highest median real estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. es are in New Jersey.

And then there are corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. es. New Jersey is in the bottom ten for corporate income taxation in the Index. Its 9% rate is the 6th highest in the country; tied with Rhode Island. New Jersey raises the 5th highest amount of revenue from state and local corporate income taxes per capita (2008).

Overall New Jersey gets last place in the Index—taking into account sales, personal and corporate income, property, and unemployment taxes. New Jersey has the highest state and local tax burden—the percentage of total state income taken in taxes as a percentage of state income—in the country at 11.8% (table 29, 2008). And New Jersey has the second highest state and local tax burden per capita in the country at $6,610 (table 28, 2008).

So, it is fair to say that New Jersey is a high-taxed state.

A lot more here.