NEW JERSEY – Republican senators called for action on their plans to save New Jersey taxpayers from suffering state income tax increases next year due to inflation after the Treasury Department estimated the cost of “tax bracket creep” at $543 million in FY 2023.
“I’ve been pushing Democrats and the Murphy administration to work with us to index New Jersey’s income tax brackets for inflation, just like the federal government and dozens of other states,” said Senator Anthony M. Bucco (R-25). “We now know that failure to act will cost New Jersey families more than half-a-billion dollars in income tax increases next year. On top of record-high gas prices and rising costs for groceries, it’s yet another expense that people can’t afford.”
Bucco sponsors legislation, S-676, which would index New Jersey’s gross income tax brackets annually for inflation, as has been done by the federal government for over 40 years and by 37 other states.
Under New Jersey’s graduated income tax rates, a single worker pays a 3.5% income tax rate to the state on income earned between $35,000 and $40,000. The tax rate jumps to 5.525% for income between $40,000 and $75,000, and then to 6.37% for income above $75,000.
In an NJ.com editorial in December, Bucco explained how tax bracket creep resulting from New Jersey’s static tax rates can leave families poorer from one year to the next when cost-of-living allowances that are intended to cover inflation push workers into a higher tax bracket.
The Murphy administration estimated the cost of failing to address tax bracket creep at $543 million in a written response to a question posed by Senator Michael Testa (R-1) during a budget hearing on May 16.
“I’m almost surprised that the Murphy administration admitted that this looming income tax increase on New Jersey families that could result from their inaction is so big,” said Testa, a member of the Senate Budget & Appropriations Committee. “When the state has $9 billion in tax overcollections this year sitting in the bank, there’s absolutely no reason for anyone to pay higher taxes next year. This is something we can and should fix.”
The Republican members of the Senate Budget Committee submitted a comprehensive budget plan on behalf of Senate Republicans that includes indexing tax brackets for inflation as proposed by Senator Bucco.
“What’s really shocking is the resistance of Democrats to our efforts to protect struggling families with lower incomes who are most likely to be pushed into higher tax brackets as a result of inflation,” said Senator Declan O’Scanlon (R-13), the Republican Budget Officer. “If Governor Murphy wants to keep his no-tax-increase pledge, he needs to work with Republicans to fix this problem before the budget is adopted.”
The budget plan proposed by Senate Republicans would provide $8 billion of total tax relief, including ending tax bracket creep and preventing impending toll increases and tax increases the Murphy administration has admitted will be collected this year on employer payrolls, employee paychecks, and health care.