New Jersey’s middle class families are paying more in taxes as a percent of their income compared to the state’s richest earners, according to a new study released Wednesday by the Institute on Taxation and Economic Policy and New Jersey Policy Perspective.
The study, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, evaluated most major state and local taxes throughout the United States.
Even with New Jersey’s expansion of the Earned Income Tax Credit, a new tax bracket for incomes over $5 million, the middle 20 percent of earners ($45,300 to $74,800) are still paying a higher share of their family income in taxes compared to the state’s top 1 percent (more than $897,300) per year.
“The wealthiest New Jerseyans have benefited most from our growing economy, yet they continue to pay a lower share of their income in taxes than middle class families,” Sheila Reynertson, senior policy analyst at NJPP, said. “The tax code remains unfair and starves New Jersey of the revenue necessary to adequately invest in its assets and programs that alleviate poverty. Governor Murphy’s first budget was a step in the right direction, but broader reforms must be pursued to tackle income inequality and ensure the state’s wealthiest residents are paying their fair share.”
New Jersey’s state and local tax system, according to ITEP’s Tax Inequality Index, did not worse income equality. It also ranked No. 46 on the index.
“Rising income inequality is unconscionable, and it is certainly a problem that local, state and federal lawmakers should address,” said Meg Wiehe, deputy director of ITEP and an author of the study. “Regressive state tax systems didn’t cause the growing income divide, but they certainly exacerbate the problem. State lawmakers have control over how their tax systems are structured. They can and should enact more equitable tax policies that raise adequate revenue in a fair, sustainable way.”
Read the full report here.
Read the New Jersey findings here.