The recent tax reform proposal from New Jersey State Senator, Raymond Lesniak, would create an income tax hike for residents over $350,000, but would also remove the estate tax.
According to the NJ Spotlight, the income tax hike plan is estimated to generate more than $850 million in tax revenue, enabling the state to pay down its $83 billion unfunded pension liability.
The proposed plan for the income tax hike
After Governor Christie vetoed all previous income tax hikes, Lesniak’s reform bill would effectively cut the $350 million estate tax. However, the bill would simultaneously increase the income tax for high net worth residents to $1.2 billion, making it the largest income tax hike in New Jersey history. The state would also have the third highest income tax in the nation, but still rank behind New York and California.
The “millionaire tax” reform would increase the state income tax for residents making more than $350,000 from 6.37 percent to 8 percent. This includes rate hikes for individuals at $500,000 to 10.25 percent, and stiffer increases for residents with over $1 million to 10.75 percent.
According to the report, the state owes $2.75 billion to fulfill its budget deficit from 2014-2015, which includes $53 billion in unfunded pension liabilities. Senator Lesniak stated that New Jersey has not made pension payments for 20 years.
“Without additional revenues, the state is facing a train wreck at the end of June that could only be duplicated by Congress. No one wants that to happen,” Senator Lesniak argued. “Public and private workers all need to have their pension income secure. Our proposal will help the governor and legislators fulfill that obligation.”
The $850 million that the income tax hike plan would generate is sufficient to fund the third year of pension payments missed in 2014.
Problems with the proposal
Critics of the proposal argued that it does not address Governor Christie’s $900 million cut in pension payments from the 2014 budget. The debt accrued is the result of a significant drop in revenues from state income taxes in 2014, which raises concerns that further tax hikes would drive wealthy residents out of New Jersey.
Furthermore, critics point out that Lesniak’s plan falls short of fulfilling the $1.5 billion necessary to bring pension payments on schedule. Ultimately, without a solution to the pension crisis, there is no hope to balance the budget for 2015, which means that an additional pension cut is inevitable.
There is also criticism that the bill hurts small businesses in the state, because many of them pay taxes through personal income taxes to avoid the stiffer business tax rates.
The impact
Senator Lesniak noted that by eliminating the estate tax, he hopes to convince residents to stay in New Jersey. According to New Jersey Chamber of Commerce President, Tom Bracken, the New Jersey Estate tax, when levied against individuals with estates worth $675,000 or more, would save millions for high net worth retirees. It remains to be seen if wealthy residents would perceive the immediate annual burden of an income tax increase as acceptable.
Understanding Chattel Paper: A Key Component in Secured Transactions
Using chattel paper to obtain a security interest in personal property is a powerful tool. It can ensure lenders have a legal claim on collateral ranging from inventory to intellectual property. To reduce risk and protect your legal rights, businesses and lenders should understand the legal framework. This framework governs the creation, sale, and enforcement […]
For years, digital assets operated in a legal gray area, a frontier where innovation outpaced the reach of regulators and law enforcement. In this early “Wild West” phase of finance, crypto startups thrived under minimal oversight. That era, however, is coming to an end. The importance of crypto compliance has become paramount as cryptocurrency has […]
Supreme Court and Title VII: Implications for Reverse Discrimination
Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
Special purpose acquisition companies (better known as SPACs) appear to be making a comeback. SPAC offerings for 2025 have already nearly surpassed last year’s totals, with additional transactions in the pipeline. SPACs last experienced a boom between 2020–2021, with approximately 600 U.S. companies raising a record $163 billion in 2021. Notable companies that went public […]
Short Form Merger: Streamlining the Process for Businesses
Merging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, […]
Tariff Response Options for Small Businesses Facing Financial Distress
The Trump Administration’s new tariffs are having an oversized impact on small businesses, which already tend to operate on razor thin margins. Many businesses have been forced to raise prices, find new suppliers, lay off staff, and delay growth plans. For businesses facing even more dire financial circumstances, there are additional tariff response options, including […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
