By Brittany De Lea
While high-tax states deal with the fallout from the $10,000 cap on state and local tax deductions, New Jersey has considered imposing a millionaire’s tax on its wealthy residents.
Democratic Gov. Phil Murphy renewed a push to implement the tax – with a top rate of 10.75 percent – on people with incomes over $1 million. However, amid disagreements with the state legislature, which threatened to shut down the state government, Murphy said he will sign a budget over the weekend.
State Democrats sent Murphy a budget proposal last week, which did not include the tax increase on people with more than $1 million. Murphy, however, has been a strong advocate for implementing the tax – it has been one of his top campaign promises. Therefore, many have a difficult time believing that the issue has been completely put to rest.
An agreement on the budget needs to reached before the start of the new fiscal year on Monday.
“They can’t tax us anymore, the middle class is getting wiped out,” former “Saturday Night Live” cast member and New Jersey resident Joe Piscopo told FOX Business’ Neil Cavuto on Friday, adding that wealthy individuals are leaving the state “in droves.”
The current top income tax rate on individuals in New Jersey is more than 8 percent, as it is in neighboring New York.
The SALT cap has hit high-tax states like New York, California and New Jersey particularly hard. As a result, affected residents have begun to move to other states – a trend that experts expect to accelerate.
The Treasury Department also recently squashed a workaround these states had been using to try to circumvent the cap – applying extra pressure to state lawmakers.
New York Gov. Andrew Cuomo said his state was seeing “significantly lower tax receipts” as a result of the SALT changes. New York Lieutenant Gov. Kathy Hochul said the changes decreased revenues and increased taxes on the middle class.
As previously reported by FOX Business, for New Jersey residents who aren’t able to up and move to tax havens like Florida or Nevada, Pennsylvania could be a local option.
New Jersey and Pennsylvania have a reciprocal personal income tax agreement whereby Pennsylvania residents who work in New Jersey and earn income there are not subject to New Jersey income taxes. Instead, they pay the lower flat-rate in their home state.
Without the agreement, a high-earning Pennsylvania resident working in New Jersey would be taxed at the 8.97 percent rate, but would only receive a credit of 3.07 percent in Pennsylvania.
New Jersey Rep. Josh Gottheimer was one of several lawmakers from states including New York, Illinois and California who took to Capitol Hill on Tuesday to air out their grievances against the new SALT cap. Gottheimer called the cap a “double-taxation grenade” that was “lobbed at New Jersey and other high-tax states” by so-called “moocher states.” The average SALT deduction claimed in Bergen County, New Jersey, was more than $24,700 before the implementation of the cap.
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