The Millionaire’s Tax Time Has Come for NJ

Contributed by Deb Kline.

Since the April Budget Springboard, ILNH constituents have been subjected to a number of actions that call for supporting the Millionaires Tax. As an organization, ILNH is officially joining the NJ Indivisible Advocacy Coalition in supporting passage of the Millionaires Tax, so our numbers add weight as they advocate with NJ legislators.

So what exactly is it?

Governor Murphy has proposed that a 10.75% income tax rate be applied to all annual earnings over $1 Million. Currently, only annual income over $5 million is taxed at this rate, and income between $500,000 and $5 million is taxed at 8.97%.

While the difference may seem relatively small, it would go a long way to reducing income inequality in the Garden State. The average annual income of NJ’s top 1% is in excess of $1.5 million, whereas the rest of the state is averaging about $65,000 in yearly income.

Perhaps it’s a bit easier to understand like this: The top one percent of NJ makes 24.3 times more than the bottom 99%. The level of income inequality in NJ ranks at the 9th worst in the nation.

Many legislators, however, have voiced their opposition to Murphy’s Millionaires tax proposal. The arguments are more based in myth than fact. Chief among the misconceptions is the higher tax rate will cause the wealthiest residents to head for more attractive, i.e., lower,  tax environments – aka the “millionaire’s tax flight.” As of this writing, NJ Senate President Steve Sweeney has come out against the Millionaires tax, even though he has supported it in the past.

New Jersey Policy Perspective, the think tank which independently analyzes state spending of taxpayer dollars and the impacts, has repeatedly exposed this myth, along with several other independent organizations ranging from Stanford University, Center on Budget and Policy Priorities and others. The bottom line: Higher tax rates do not cause the wealthy to move.  

In addition, with the 2017 Federal tax changes, wealthy earners still come out way ahead. The Millionaires tax also is a marginal tax, meaning that the 10.75% doesn’t apply to the total amount earned, only to that which is in excess of $1 Million.

The Millionaires tax is highly popular – up to 75% of New Jerseyans support it. The NJ Legislature passed a similar tax five times, only to have it vetoed under former Governor Christie.

In a nutshell: We need the millionaires’ tax

• Governor Murphy has promised that the Millionaires tax will go to helping keep property taxes in check. Income taxes in New Jersey must go to property tax relief, so generating more income via a tax on the top earners will mean more property tax relief for all.
• It will help reduce the effects of extreme income inequality. Right now the top 1% of earners in New Jersey take home 19.1% of all income in the state. In the late 1970s it was closer to 10% of all income.
• It will not drive high earners out of the state. In 1994, New Jersey had 10,481 tax filers, or 0.2% of all filers, who reported income of $500,000 or more; in 2015, the state had 62,154 such filers, or more than 2% of all filers.

Call to Action:

• Call or write your state legislators — if you don’t know who they are, you can find out here — and tell them you support the Millionaires’ tax and you want them to make sure it stays in the budget. Every call makes a difference. They need to hear from their constituents that they should do the right thing, especially this year since the Assembly is all up for re-election in November.
• Call or write Senate President Steve Sweeney and tell him to support the Millionaires tax. He did so previously but has come out against it this round.
• Thank Senator Shirley Turner for coming out in support of the Millionaires tax at a town hall on 5/6/19.
• Ask your legislators to make a public statement in support of the Millionaires’ tax. This can help sway legislators who are undecided.
• Attend: The Tax Fairness and Advocacy Training hosted by NJPP on May 19 at Rutgers. Pre-registration is required: https://www.facebook.com/events/694134897667403/

If you live outside of NJ, find out if there are similar existing taxes or proposals in your state. If not, call on your legislators and tell them there’s every good reason to get it on the docket and no good reason not to.

Source: Millionaires Tax is the Right Policy at the Right Time, Brandon McKoy, president, NJPP, April 2, 2019