January 30, 2013

The Star-Ledger: Poorest N.J. residents face biggest tax burden

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(Original Post)

By Ryan Hutchins/The Star-Ledger
on January 30, 2013 at 6:35 AM, updated January 30, 2013 at 6:38 AM

TRENTON — New Jersey’s poorest families pay more than 11 percent of their income toward state and local taxes, while the tax bite for the richest is about 7 percent, a study released Tuesday has found.

The study — conducted by the Institute on Taxation & Economic Policy in Washington — concluded that while the wealthy pay higher income tax rates, the lower brackets actually shell out a higher percentage of their pay when sales and property taxes are added to the equation. The institute found the poor are paying slightly more, and the rich slightly less, since its last study in 2007.

“When you take a look at the percentage of one’s income that goes out in taxes, the poorer you are, the higher the percentage,” said Gordon MacInnes, president of New Jersey Policy Perspective, a left-leaning think tank. “We have very high property taxes compared to most states.”

The richest residents — those earning more than $679,000 a year — pay about 2.3 percent of their income toward property taxes while those earning less than $21,000 a year pay 6.6 percent, according to the study, which excluded the elderly.

There’s a greater disparity for sales and excise taxes: Top earners pay out 0.7 percent, while the lowest income group pays 5.5 percent, the report found.

The top earners pay more for their state income taxes — 6.8 percent, according to the study — and that accounts for more than 36 percent of the state’s total revenue each year, said Bill Quinn, a spokesman for the state Treasury Department. New Jersey’s progressive income tax system charges less to the lower brackets, and some working poor are eligible for Earned Income Tax credits.

“There’s broad agreement that New Jersey has a highly-progressive income tax system in which the people at the very top pay a very large percentage of the total tax,” said Quinn.

The study says virtually every state has a tax system where poorer residents pay a higher percentage of their income to state and local taxes. New Jersey is at about the national average.

Gov. Chris Christie, who has rejected calls for a higher tax on millionaires, vetoed an increase to the state’s $7.25 minimum wage on Monday, instead proposing to phase in $1-an-hour bump over 3 years. He also promised to increase the Earned Income Tax Credit for the working poor, which he slashed during his first year in office, if Democrats went along with his plan.

MacInnes said beefing up the tax credit is perhaps the “best way” to ease the disparity. “I think that would be a helpful step,” he said.



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