FAIR? New Jersey’s Millionaire’s Tax and Property Tax Relief Bill

Dateline: June 29, 2004

Overview:

On June 29, 2004 Governor McGreevey signed the “Fair and Immediate Relief ” or “FAIR” tax bill, a/k/a the “Millionaire’s Tax” bill into law (P.L.2004, c.40). This bill represents the first state income tax hike in New Jersey in 14 years. It will raise taxes on New Jersey residents earning more than $500,000 a year in an effort to generate revenue to support property tax relief for lower income earners. The measure is retroactively effective to January 1, 2004. Click on the bill number to see the full text of Assembly bill A100 , which amends N.J.S. 54A et seq. The official summary statement of the bill can be found here.

Income Tax Increase for those with Adjusted Gross Income in Excess of $500,000:

The new tax law increases the top marginal state income tax rate on taxpayers earning $500,000 or more to 8.97% from 6.37% — a 41% increase. This is a tax on a taxpayer’s “gross income”, after taking account of items that are excluded from “gross income”, such as certain retirement benefits and interest on municipal bonds. The new law also imposes a withholding tax rate of 12% on salary and wage income paid in excess of $500,000.

The Governor’s office projects that this tax hike will raise $800 million from about 28,500 New Jersey taxpayers. As a result of this new law, New Jersey now has the fourth highest income tax rate in the nation, among states that tax both income and sales. (see commentary on New Jersey’s tax system from the Tax Foundation).

Property Tax Relief for Senior Citizens and Middle Class

According to Governor McGreevey, nearly 2 million senior citizens and middle class New Jerseyans will benefit from this new law. In addition to increasing the tax on New Jersey’s top earners, the new law will:

Double direct property tax relief from $670 million to $1.5 billion,

Increase the maximum Homestead Rebate check for senior citizens from $775 to $1200,

Permit increases in direct property tax relief for non-senior citizens whose income is less than $125,000 by increasing the maximum rebate from $250 to $800

Double the property tax relief for those earning between $125,000 and $200,000 from $250 to $500.

This new law combines the NJ SAVER property tax rebate program into the Homestead Property Tax Rebate Program. Full details on who qualifies for which program and the filing requirements can be found at The New Jersey Division of Taxation – Property Tax Relief Programs. This link will take you to a one-page summary sheet explaining the details of the revised property tax rebate programs.