Bill Text: NJ S89 | 2018-2019 | Regular Session | Introduced
Bill Title: Indexes for inflation taxable income brackets under New Jersey gross income tax.
Spectrum: Partisan Bill (Republican 3-0)
Status: (Introduced - Dead) 2018-01-09 - Introduced in the Senate, Referred to Senate Budget and Appropriations Committee [S89 Detail]
Download: New_Jersey-2018-S89-Introduced.html
Sponsored by:
Senator ANTHONY R. BUCCO
District 25 (Morris and Somerset)
Senator STEVEN V. OROHO
District 24 (Morris, Sussex and Warren)
SYNOPSIS
Indexes for inflation taxable income brackets under New Jersey gross income tax.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act indexing for inflation the taxable income brackets under the New Jersey gross income tax, amending N.J.S.54A:2-1.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.54A:2-1 is amended to read as follows:
54A:2-1. Imposition of tax. There is hereby imposed a tax for each taxable year (which shall be the same as the taxable year for federal income tax purposes) on the New Jersey gross income as herein defined of every individual, estate or trust (other than a charitable trust or a trust forming part of a pension or profit-sharing plan), subject to the deductions, limitations and modifications hereinafter provided, determined in accordance with the following tables with respect to taxpayers' taxable income:
a. For married individuals filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes:
(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
If the taxable income is: The tax is:
Not over $20,000.00.......... 2% of taxable income
Over $20,000.00 but not
over $50,000.00............. $400.00 plus 2.5% of the
excess over $20,000.00
Over $50,000.00 but not
over $70,000.00.............. $1,150.00 plus 3.5% of the
excess over $50,000.00
Over $70,000.00 but not
over $80,000.00.............. $1,850.00 plus 5.0% of the
excess over $70,000.00
Over $80,000.00 but not
over $150,000.00............. $2,350.00 plus 6.5% of the
excess over $80,000.00
Over $150,000.00............... $6,900.00 plus 7.0% of the
excess over $150,000.00
(2) for taxable years beginning
on or after January 1, 1994 but before January 1, 1995:
If the taxable income is: The tax is:
Not over $20,000.00.............. 1.900% of taxable income
Over $20,000.00 but not
over $50,000.00................ $380.00 plus 2.375% of the
excess over $20,000.00
Over $50,000.00 but not
over $70,000.00.............. $1,092.50 plus 3.325% of the
excess over $50,000.00
Over $70,000.00 but not
over $80,000.00.............. $1,757.50 plus 4.750% of the
excess over $70,000.00
Over $80,000.00 but not
over $150,000.00............. $2,232.50 plus 6.175% of the
excess over $80,000.00
Over $150,000.00 ............. $6,555.00 plus 6.650% of the
excess over $150,000.00
(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
If the taxable income is: The tax is:
Not over $20,000.00............. 1.700% of taxable income
Over $20,000.00 but not
over $50,000.00................ $340.00 plus 2.125% of the
excess over $20,000.00
Over $50,000.00 but not
over $70,000.00.............. $977.50 plus 2.975% of the
excess over $50,000.00
Over $70,000.00 but not
over $80,000.00.............. $1,572.50 plus 4.250% of the
excess over $70,000.00
Over $80,000.00 but not
over $150,000.00............. $1,997.50 plus 6.013% of the
excess over $80,000.00
Over $150,000.00 ............. $6,206.60 plus 6.580% of the
excess over $150,000.00
(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
If the taxable income is: The tax is:
Not over $20,000.00............ 1.400% of taxable income
Over $20,000.00 but not
over $50,000.00................ $280.00 plus 1.750% of the
excess over $20,000.00
Over $50,000.00 but not
over $70,000.00.............. $805.00 plus 2.450% of the
excess over $50,000.00
Over $70,000.00 but not
over $80,000.00.............. $1,295.50 plus 3.500% of the
excess over $70,000.00
Over $80,000.00 but not
over $150,000.00............. $1,645.00 plus 5.525% of the
excess over $80,000.00
Over $150,000.00 ............. $5,512.50 plus 6.370% of the
excess over $150,000.00
(5) for taxable years beginning on or after January 1, 2004:
If the taxable income is: The tax is:
Not over $20,000.00 ........... 1.400% of taxable income
Over $20,000.00 but not
over $50,000.00 ................ $280.00 plus 1.750% of the
excess over $20,000.00
Over $50,000.00 but not
over $70,000.00 ............. $805.00 plus 2.450% of the
excess over $50,000.00
Over $70,000.00 but not
over $80,000.00 ............. $1,295.50 plus 3.500% of the
excess over $70,000.00
Over $80,000.00 but not
over $150,000.00 ............ $1,645.00 plus 5.525% of the
excess over $80,000.00
Over $150,000.00 but not
over $500,000.00 ............ $5,512.50 plus 6.370% of the
excess over $150,000.00
Over $500,000.00 ............ $27,807.50 plus 8.970% of the
excess over $500,000.00
b. For married individuals filing separately, unmarried individuals other than individuals filing as head of household or as a surviving spouse for federal income tax purposes, and estates and trusts:
(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
If the taxable income is: The tax is:
Not over $20,000.00............ 2% of taxable income
Over $20,000.00 but not
over $35,000.00................ $400.00 plus 2.5% of the
excess over $20,000.00
Over $35,000.00 but not
over $40,000.00................ $775.00 plus 5.0% of the
excess over $35,000.00
Over $40,000.00 but not
over $75,000.00.............. $1,025.00 plus 6.5% of the
excess over $40,000.00
Over $75,000.00................ $3,300.00 plus 7.0% of the
excess over $75,000.00
(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:
If the taxable income is: The tax is:
Not over $20,000.00...... 1.900% of taxable income
Over $20,000.00 but not
over $35,000.00......... $380.00 plus 2.375% of the
excess over $20,000.00
Over $35,000.00 but not
over $40,000.00................ $736.25 plus 4.750% of the
excess over $35,000.00
Over $40,000.00 but not
over $75,000.00.............. $973.75 plus 6.175% of the
excess over $40,000.00
Over $75,000.00............... $3,135.00 plus 6.650% of the
excess over $75,000.00
(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
If the taxable income is: The tax is:
Not over $20,000.00......... 1.700% of taxable income
Over $20,000.00 but not
over $35,000.00................ $340.00 plus 2.125% of the
excess over $20,000.00
Over $35,000.00 but not
over $40,000.00................ $658.75 plus 4.250% of the
excess over $35,000.00
Over $40,000.00 but not
over $75,000.00.............. $871.25 plus 6.013% of the
excess over $40,000.00
Over $75,000.00............... $2,975.80 plus 6.580% of the
excess over $75,000.00
(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
If the taxable income is: The tax is:
Not over $20,000.00............ 1.400% of taxable income
Over $20,000.00 but not
over $35,000.00................ $280.00 plus 1.750% of the
excess over $20,000.00
Over $35,000.00 but not
over $40,000.00................ $542.50 plus 3.500% of the
excess over $35,000.00
Over $40,000.00 but not
over $75,000.00.............. $717.50 plus 5.525% of the
excess over $40,000.00
Over $75,000.00............... $2,651.25 plus 6.370% of the
excess over $75,000.00
(5) for taxable years beginning on or after January 1, 2004:
If the taxable income is: The tax is:
Not over $20,000.00 ............ 1.400% of taxable income
Over $20,000.00 but not
over $35,000.00 ............... $280.00 plus 1.750% of the
excess over $20,000.00
Over $35,000.00 but not
over $40,000.00 ............... $542.50 plus 3.500% of the
excess over $35,000.00
Over $40,000.00 but not
over $75,000.00 ............. $717.50 plus 5.525% of the
excess over $40,000.00
Over $75,000.00 but not
over $500,000.00 ............. $2,651.25 plus 6.370% of the
excess over $75,000.00
Over $500,000.00 ............... $29,723.75 plus 8.970% of the
excess over $500,000.00
c. For the purposes of this section, an individual who would be eligible to file as a head of household for federal income tax purposes but for the fact that such taxpayer is a nonresident alien, shall determine tax pursuant to subsection a. of this section.
d. The director shall annually recompute the taxable income bracket amounts and tax amount per taxable income bracket by multiplying each adjusted taxable income bracket amount by the cost-of-living adjustment, and recomputing the taxable income bracket amounts at the statutory tax rates with the recomputed bracket amounts. Notwithstanding the taxable income bracket amounts and tax amount per taxable income bracket provided in the tax tables in this section, each taxpayer shall use the adjusted taxable income bracket amounts and tax amount per taxable income bracket as computed by the director for the applicable taxable year. The director shall round the recomputed taxable income bracket amounts to the next highest multiple of $10.
e. For the purposes of this section, "cost-of-living adjustment" means the factor calculated by dividing the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the calendar year preceding the calendar year in which P.L. , c. (pending before the Legislature as this bill) takes effect.
(cf: P.L.2004, c.40, s.17)
2. This act shall take effect immediately and shall apply to taxable years beginning on and after January 1 next following the date of enactment.
STATEMENT
This bill indexes for inflation the taxable income brackets under the New Jersey gross income tax. This adds to the State personal income tax a common-sense taxpayer protection called inflation indexing that has been provided under the federal income tax since the 1980s. Inflation indexing means that tax brackets are revised annually to reflect nominal price and wage increases that result from inflation. When tax brackets are not indexed for inflation it results in what is called "bracket creep," which is an increase in effective tax rates caused by inflation. Higher income can bump a taxpayer into the next tax bracket, even if that higher income is merely keeping pace with inflation. A lack of inflation adjustment can also push more of a taxpayer's income into the highest bracket for which they qualify. The final result is a tax increase that occurs without any legislation being passed. Indexing addresses this by altering each bracket level each year by the level of annual inflation.
Under this bill the inflation adjustment for taxable income brackets is the national consumer price index for all urban consumers as prepared by the United States Department of Labor. This is the same measure of inflation that is used for indexing the taxable income brackets under the federal Internal Revenue Code. The bill compares an annual inflation measure from the year prior to the one for which taxes will be imposed to a base year measure from the year prior to the one in which the bill is enacted. This delay allows the Director of the Division of Taxation to determine the adjusted amounts when the tax year begins.
