After a fix, families to get tax credit sooner

JOHN REITMEYER, BUDGET/FINANCE WRITER | OCTOBER 6, 2022 

NJ Spotlight News

Gov. Phil Murphy

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A state-level child tax credit worth up to $500 is available for the first time in New Jersey, and Gov. Phil Murphy and lawmakers have officially moved up its effective date.

Under a law enacted by Murphy earlier this week, thousands of families earning up to $80,000 annually with children under the age of six will no longer have to wait until 2024 to claim their tax credits.

Instead, they can claim those credits when they file their state tax returns next year. Legislative sponsors said that was their original intention, despite the tax break initially established by Murphy and lawmakers having a later effective date.

Advocates for low-income residents say the amended tax-break law will provide much-needed relief more quickly to families struggling to get by in a state that’s known for its high cost of living.

“Working class families need help right now to keep up with rising costs, and this law will make sure the new Child Tax Credit provides immediate relief,” said Peter Chen, senior policy analyst at New Jersey Policy Perspective, a Trenton-based think tank.

New Jersey already offers families a tax credit to help them offset qualified costs associated with the care of children and other dependents. Murphy and lawmakers enhanced that credit last year amid the COVID-19 pandemic.

But Chen’s organization and other advocates for low-income residents called on state policymakers earlier this year to also establish a per-child tax credit in New Jersey. It was needed, they argued, to ease the burden on families struggling to get by in a state known for having relatively high median incomes, but also a significant population living in poverty.

New Jersey’s tax-credit efforts were launched after federal lawmakers in Washington, D.C., struggled to find consensus on whether to renew an enhanced federal child tax credit that was funded last year through the $1.9 trillion American Rescue Plan Act. Studies have indicated the enhanced federal credits, often referred to as the CTC, helped to combat childhood poverty and ease other financial burdens.

Working against the clock

Yet New Jersey’s child tax credit almost fell victim to the type of sloppy policymaking that often occurs inside the State House when lawmakers rush to enact a new state budget and other related policy changes in advance of the state Constitution’s July 1 deadline for the annual appropriations act.

The original draft of the child tax-credit legislation cited the success of the federal tax breaks and called for state-level tax credits to be established and go into effect immediately for the 2022 tax year.

But the bill would undergo several changes before Murphy signed it in late June, including a last-minute amendment that said the tax credit would begin with the 2023 tax year instead of immediately. And that change was made even though the appropriations act itself was amended to account for a $100 million loss of income-tax revenue that was based on the child tax credit becoming applicable to the 2022 tax year.

It was only after the bill became law — and the timing issue was raised by Republicans — that Murphy issued a statement along with legislative leaders and sponsors that promised to move up the effective date to the 2022 tax year.

As a result, those earning up to $30,000 annually are now eligible to receive $500 per-child tax credits when they file their taxes next year. For those earning between $30,000 and $40,000 annually, the credits are worth $400; for those earning between $40,000 and $50,000 annually, they are worth $300; and for those earning between $50,000 and $60,000 annually, they are worth $200. For those earning between $60,000 and $80,000 annually, the credits are worth $100.

Meanwhile, the tax break was also established as a refundable credit, which means those who are eligible can claim the full amount regardless of what they owe in state income taxes.

Counting the kids

A fiscal analysis prepared by nonpartisan legislative analysts determined the parents of an estimated 374,000 children under the age of six are eligible to claim the state tax credits during the 2022 tax year.

“We appreciate Gov. Murphy and the Legislature prioritizing this vital tax credit for working families,” said Dena Mottola Jaborska, executive director of New Jersey Citizen Action.

“The CTC is one of the most effective and direct solutions available for reducing poverty, especially among children,” she said.

The child tax credit is just the latest targeted tax cut that Murphy and lawmakers have enacted in recent years in response to concerns about affordability. Others include new income tax breaks for student loans, an expanded state income tax exclusion for retirement income and an overhaul of direct property-tax relief benefits that includes making renters eligible to receive benefits.

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published this page in News and Politics 2022-10-06 03:20:37 -0700