The New Jersey state Assembly passed legislation on Thursday that includes several 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. increases to help balance the governor’s proposed $29 billion budget. Like most states, New Jersey’s revenues have been hit hard by the struggling economy and now lawmakers are unable to meet desired spending levels. As a result lawmakers want to increase taxes on high income earners, increase excise taxes on cigarettes and alcohol, and reduce 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. rebates and deductions.
My colleague Joe Henchman outlined the income tax increases in May. There are three new temporary rates included in the budget proposal that will last one year: 8% on income over $400K, 10.25% on income over $500,000, and 10.75% on income over $1,000,000.
The new budget includes a $5000 limit on the property tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. for fliers with income between $150,000 and $250,000. Those with income over $250,000 will not be allowed to take a deduction for property taxes paid. In addition, the state’s property tax rebate program will be scaled back to include only taxpayers earning less than $75,000, with exceptions for seniors and the disabled. The plan also eliminates property tax rebates for renters.
The budget also includes some tax changes that were not under consideration back in May. The cigarette 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. rate will increase by 12.5 cents to $2.70 per pack, giving the state the third highest cigarette excise tax in the country. The wine and spirits excise tax rates will increase by 25%, rising to 87.5 cents per gallon and $5.5 per gallon, respectively.
The troubled budget situation was helped somewhat when New Jersey’s tax amnesty program brought in $600 million, three times what was expected.
Assuming a similar budget passes the Senate, Governor Corzine will likely sign off on the plan.
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