Republicans Proposed Ending Tax Bracket Creep to Save NJ Families from $543 Million Income Tax Increase
Senator Anthony M. Bucco said Trenton Democrats ignored an easy opportunity to help New Jerseyans struggling with inflation following news that the cost of goods and services is now rising at the fastest rate in more than 40 years.
Sen. Anthony M. Bucco said Trenton Democrats ignored an easy opportunity to help New Jerseyans struggling with inflation following news that the cost of goods and services is now rising at the fastest rate in more than 40 years. (©iStock)
“Inflation doesn’t just impact how much you pay at the grocery store, it also impacts how much you pay in state income taxes,” said Bucco (R-25). “That’s because New Jersey is one of the few states that doesn’t index its tax brackets for inflation, which means cost-of-living pay increases can push workers into higher tax rates where they pay more. In fact, New Jersey families will pay $543 million more in income taxes this year because Governor Murphy and Trenton Democrats refused to work with us to fix the problem of tax bracket creep.”
On Wednesday, the federal Bureau of Labor Statistics reported that the Consumer Price Index (CPI) increased by 9.1% over the past year, which is reflected in higher prices for common goods and services including food, groceries, gasoline, rent, and utility bills.
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.
Tax bracket creep disproportionately hurts poorer families and small business owners with lower levels of income where the tax brackets are spaced closely together and small changes in income can result in big changes in tax rates.
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.
Additionally, the comprehensive FY 2023 State Budget plan proposed by Senate Republicans proposed $8 billion of total tax relief for New Jerseyans, including indexing tax brackets for inflation as proposed by Bucco.
Trenton Democrats failed to enact either proposal or take any steps of their own to address tax bracket creep.
The Murphy administration estimated the cost of tax bracket creep to taxpayers at $543 million this year in a written response to a question posed by Senator Michael Testa (R-1) during a budget hearing on May 16.
“If there ever was a year that New Jersey could have afforded to address tax bracket creep, it was this year when we had $9 billion in tax overcollections supporting the new state budget,” added Bucco. “Unfortunately, this didn’t get done when the new budget passed in June. I’m hoping my Democrat colleagues will see the light and be willing to work with us this fall. It’s not too late to help all of the struggling families who can’t afford an income tax increase on top of high gas prices and inflation.”
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