Pressure Grows for NJ to Change Income Tax Brackets Due to Inflation

A day after the Internal Revenue Service (IRS) announced changes to federal income tax brackets to protect workers from inflation, Senator Anthony M. Bucco called for New Jersey lawmakers to advance his legislation to prevent tax bracket creep at the state level for New Jerseyans.

“Yesterday’s action by the IRS to raise the income thresholds for federal tax brackets was a reminder that New Jersey is one of just a few states that doesn’t annually index our tax brackets for inflation,” said Bucco (R-25). “Unfortunately, legislation that would address this issue for state taxpayers has stalled in Trenton. While Democrats dither on the tax relief I have proposed, more New Jersey families will find themselves with higher state tax bills and smaller paychecks as a result of inflation.”

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.

The legislation passed the Senate Budget & Appropriations Committee in March but hasn’t been given a vote by the full Senate.

An effort by Republicans in the General Assembly to bring their identical version of the bill up for a vote was blocked by Democrats in June.

Additionally, the comprehensive FY 2023 State Budget plan proposed by Senate Republicans in May would have provided $8 billion of total tax relief for New Jerseyans, including indexing tax brackets for inflation as proposed by Bucco.

Trenton Democrats failed to consider the Republican budget proposals or take any steps of their own to address tax bracket creep for New Jersey families.

“There’s absolutely no reason New Jersey should continue to penalize families with higher taxes for getting small raises that probably aren’t even keeping up with inflation,” added Bucco. “All of these New Jersey families that are living day to day and paycheck to paycheck deserve relief. I urge my colleagues on the other side of the aisle and the Murphy administration to work with us to finally solve this problem for taxpayers.”

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