If Gov. Jon Corzine and the State Legislature have their way, we can all congratulate New Jersey for stealing the number one spot for highest state/local tax burden in the country from…New Jersey.
That’s right. This week, the legislature is poised to vote on Gov. Corzine’s proposed budget that raises taxes by well over $1.5 billion. New Jersey would essentially outdo itself for most inhospitable tax climate in the country.
Under the budget package passed by the Assembly and Senate Budget Committees, the personal income tax rate will become even more progressive with a top rate of 10.75% – just shy of the highest in the nation. Note that two-thirds of small businesses also pay under this tax rate. This comes despite the fact that New Jersey has had a net out-flow of residents every year for the past ten years. Two of the top destinations for those who left were Pennsylvania and Florida, which have flat income tax rates of 3.07% and 0% respectively. Surprise, surprise.
The budget also targets alcohol beverage and tobacco taxes for an estimated $40 million-plus in new revenue. Having completely failed to learn from history, policymakers are proposing a 12.5-cent per pack cigarette tax hike, despite the fact that the last time the cigarette tax was raised in New Jersey, the state collected $52 million less than projected and $22 million below what they collected before the tax hike. Similarly, the last time the federal alcohol tax was hiked, it took over a decade to raise more revenue. As sales decline due to higher taxes, cigarettes and alcohol become shrinking and exceptionally volatile revenue sources. These tax hikes are also poised to seriously impact the state’s huge hospitality and retail industry, where businesses will be forced to cut jobs, wages, or downsize to compensate from declining sales.
Businesses will see numerous tax increases, including the small business tax hike mentioned above.
- Extending the 4% corporate tax surcharge that was set to expire at the end of June.
- A $350 million payroll tax hike that resulted from so many people collecting unemployment checks (probably the result of business taxes that dramatically stifle job creation).
- Raising the health insurance tax from 1% to 2.25%, which will also make health care most costly.
To top it off, despite having the highest property taxes in the nation – at $6,500 per household – the budget suspends property tax deductions and rebates for all but a few New Jersey residents.
If you need any other reasons to congratulate New Jersey on their fiscal irresponsibility, make sure to read our prior blog post on Gov. Corzine’s budget.
New Jersey Residents: CLICK HERE to write your state lawmakers and Governor Corzine in opposition to the budget package.
(photo by mtstradling)