Tax rates on the rise in New Jersey

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TRENTON, N.J. — New Jersey bolstered its reputation as one of the country’s highest-taxed states in 2018, raising rates on high income earners, businesses and motorists, and posting yet again among the nation’s highest average property tax bills.

Some rates, though, like the estate and sales taxes declined.

The past year brought in Democratic Gov. Phil Murphy, who pledged to shore up the state’s shaky budget by raising rates on millionaires and rolling back a fractional sales tax cut under his predecessor, Republican Chris Christie.

In the end, Murphy and the Democrat-led Legislature’s wrangling resulted in higher rates on the state’s richest earners and businesses with incomes over $1 million.

The state’s gas tax also climbed by more than 10 percent or 4.3 cents per gallon.

The latest data on property taxes came out this year and showed they climbed 1.64 percent to nearly $8,700 in 2017.

A closer look at how New Jersey’s tax picture changed in 2018.

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MEGA-MILLIONAIRES

Murphy’s pledge to boost income tax rates on people making more than $1 million hit a wall in the Legislature, where leaders instead pushed him to accept a higher rate on those making $5 million an above. That means those earners will go from paying an 8.97 percent top rate to 10.75 percent under the new budget.

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BUSINESSES

New Jersey will have the second-highest business tax in the country, after Iowa, on firms that make more than $1 million under changes Murphy and lawmakers agreed to in the budget. Under the deal, businesses earning over $1 million will see an average hike of 2 percent over four years. The hike is set to expire after the fourth year when the rate would drop back to 9 percent.

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PAIN AT THE PUMP

On Oct. 1, drivers started paying 4.3 cents more per gallon at the pump. That’s thanks to the 2016 transportation trust fund deal that Christie worked out with legislators. To fund road and bridge projects, the deal raised the gas tax by 23 cents but also cut other taxes, like sales and estate, on Christie’s insistence for “tax fairness.” A little known part of the deal, though, was a required steady revenue stream to support a $2 billion a year trust fund for transportation work, up from $1.6 billion before.

To do that, the law requires the treasurer and legislative officials to review revenue and set the tax rate to reach the target figure. This year officials say they determined the rate would have to climb by 4.3 cents.

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PROPERTY TAXES

New Jersey’s perennial issue is its sky-high property taxes, which crept higher in 2017, according to the latest data available in 2018. The average property tax bill climbed from $8,549 to $8,690, according to the Department of Community Affairs. New Jersey has the highest property tax rate and per capita burden in the country, according to the conservative-leaning think tank Tax Foundation. The foundation based its 2018 analysis of per capita property tax burdens on the most recently available Census data from 2015 and found residents shoulder a $3,074 tax bill. For comparison, Pennsylvanians have a $1,481 burden per capita, the foundation found.

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SALES TAX

The sales tax dropped from 6.875 percent to 6.625 percent this year as part of the gas-tax deal Christie made before he left office. Murphy had sought to restore it to 7 percent before the Christie-era agreement, but that plan died in the Legislature. The sales tax, though, applies to some new categories thanks to the budget deal Murphy reached with lawmakers. E-cigarettes and Airbnb lodging will now be subject to the sales tax.

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DEATH OF THE ESTATE TAX

A final result of the 2016 transportation deal Christie cut meant the end of the state’s tax on estates after residents died. New Jersey formerly had one of the lowest thresholds in the country for levying the estate tax at $675,000, but Christie and lawmakers phased it out. It was entirely gone for anyone who died after Jan. 1.

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