With the tax increase expected to pass the Democratically controlled legislature, the state’s gross income tax rate on income between $1 million and $5 million would increase from 8.97% to 10.75%. Individuals with income over $5 million currently pay that top marginal tax rate. This will make the state one of the highest taxed states in the nation. Additional budget details are expected to be revealed in the coming days.
Assembly Minority Leader Jon Bramnick, said: “Governor Murphy’s plan to raise taxes is a gift for the Florida economy and a nightmare for New Jersey. Passing another ill-conceived tax will make out-migration worse and shift the tax burden onto the middle class when others leave.” This could be a short term solution to current fiscal problems, but may drastically affect the future of the state’s economy.
As its been reported time after time, those in the Northeast have been already fleeing to lower-taxed states. Since residency audits continue to rise in New Jersey, New York, and the surrounding region; a tax increase during the middle of a pandemic only accelerates relocation decisions for high-income earners. As people are working remotely, business owners and employees are considering their options with state tax planning. One of these planning opportunities that business owners may need to consider is the New Jersey “BAIT” SALT Deduction Limitation Workaround, as we wrote about in our September 2, 2020 article.
As states and localities continue to face significant budget shortfalls due to COVID-19, it is expected legislatures will continue putting forth new tax measures in order to balance budgets. Withum’s State and Local Tax Group can help businesses navigate through these uncertain times.