The coronavirus pandemic has impacted New Jersey’s finances in an unprecedented way, resulting in the state spending hundreds of millions of dollars toward relief efforts. Even with federal aid and borrowing available to help support revenue shortfalls, the state needs to do more to ensure financial stability now and in the future.
By increasing the income tax on the state’s wealthiest households, New Jersey could raise $1.5 billion to support COVID-19 relief efforts, according to a report by New Jersey Policy Perspective.
The report, Road to Recovery: Reforming New Jersey’s Income Tax Code, said that reform is necessary to fix the state’s finances and prevent budget cuts to public services, and proposed creating new tax brackets at the $250,000 and $1 million levels as well as increasing the tax contribution at the existing $500,000 and $5 million brackets. The proposal does not change income brackets for those who make less than $250,000 a year.
“New Jersey’s recovery from the COVID-19 pandemic will depend on the policy decisions made in the coming weeks and months,” Sheila Reynertson, senior policy analyst at New Jersey Policy Perspective and author of the report, said.
“State lawmakers can either balance the budget with deep cuts that will harm our communities, or they can make sure the wealthiest among us pay their fair share. The current tax code puts middle-class and low-paid families at a disadvantage. The reforms outlined in this report will help fix that, while also providing the state with more resources to get us out of this downturn.”
Currently, New Jersey’s middle-class families pay a higher share of their income in state and local taxes than the state’s Top 1% of earners (10.7% and 9.8% respectively). NJPP’s proposal calls for the Top 1% to pay 10.8% of their annual income in state and local taxes.
Due to the nation’s history of racial inequity, New Jersey’s Black and brown communities have been hardest hit by the economic fallout from the COVID-19 pandemic, the NJPP report said. These communities will also be the most impacted if cuts to public services happen.
“The sustained protests against racial discrimination and police brutality against Black Americans have put state and local budgets in the spotlight,” Reynertson said. “Fixing the tax code is the best way for lawmakers to put into practice the values and priorities we hold as a state. This moment presents a big opportunity for New Jersey to advance racial equity and invest in the building blocks of a strong economy that works for everyone.”