N.J. would be hit hardest by Biden’s tax hikes on the rich, study shows

Posted May 05, 2021

President Joe Biden’s proposed tax increases on the wealthy would prompt a greater percentage of New Jersey taxpayers to pay more than in any other state, according to a new study.

The Institute on Taxation and Economic Policy, a progressive research group, found 1.2% of New Jersey taxpayers, or 53,000, would see their taxes go up. That’s tied with Massachusetts for the highest percentage of a state’s taxpayers facing a tax hike.

Still, that means that 98.8% of New Jersey’s taxpayers would see no increase. Nationally, the percentage would be 99.3%, leaving 0.7%, or 1.1 million filers, who would be affected.

“The president’s proposed tax increases would affect only the very rich, one percent or less of taxpayers,” said Steve Wamhoff, the group’s director for federal tax policy. “If you are a remotely normal American, you will not pay more and you probably don’t even know anyone who will pay more.”

The states most affected have more high-income taxpayers. It’s also one reason why those states send billions of dollars more to Washington than they receive in services, because their higher earners pay more in federal income taxes.

New Jersey, Massachusetts, New York, California and Connecticut are the only states where more than 1% of their taxpayers would face a higher tax bill under Biden’s plan. They’re also the five states with the highest average income per person, according to the World Population Review.

All five states also are among those hardest hit by the $10,000 cap on deducting state and local income and property taxes, which also affects millions of middle-class homeowners.

The states with the fewest percentage of high-income earners facing a tax hike were West Virginia at 0.1% and Arkansas, Louisiana, Mississippi, New Mexico, Oklahoma and South Carolina at 0.3%, according to the study.

Biden proposed restoring the top tax rate to 39.6%, where it was before the GOP lowered it to the current 37%, plus taxing capital gains for millionaires at the same rate as wages. Former President Ronald Reagan and Congress taxed income from wages and investments at the same rate in their 1986 tax overhaul.

Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, called Biden’s proposal “the biggest economic blunder in our lifetime.”

“Raising crippling taxes as we try to recover from this pandemic makes no economic sense,” Brady said earlier this week on the Fox News Channel. “It lands on working families and will drive U.S. jobs overseas. There couldn’t be a worse time to do this.”

But a Moody’s Analytics report released Monday said Biden’s plan would improve the economy in the long run and “the financial benefits of that added growth largely accrue to hard-pressed lower-income and less-wealthy Americans.”

In addition, since the Republican tax cuts enacted in the Trump administration “did not lift economic growth, it is tough to argue that increasing them will appreciably hurt growth,” the report said.

The Congressional Research Service previously reported that economic growth was in line with government forecasts before the tax cut passed, and that corporations shared little of their tax savings with their workers in the form of higher wages or bonuses.

As part of the debate on Biden’s tax proposals, 32 House members of both parties, more than enough to sink any legislation, have called for eliminating the $10,000 cap on how much local and state taxes can be deducted from federal income taxes, known as SALT.

A separate ITEP study found that 30% of New Jerseyans would see a tax decrease if the $10,000 cap was suspended, more than any other state. And 80% of the 1.9 million New Jerseyans who would be helped had an average income of $216,000 or less, even as 72% of the benefits would go to the richest 5%.

“A family or three or four with a family income of $200,000 living in New Jersey is making ends meet,” said Rep. Bonnie Watson Coleman, D-12th Dist.

White House press secretary Jen Psaki said Tuesday that the issue is on the table, but since restoring the deduction would cost money, discussions have to focus on how to pay for it.

The House in 2019 voted to fund the full deduction by raising the top tax rate, but Biden has already earmarked those revenues for other spending in his proposal.

“This is democracy in action,” Psaki said. “This is what’s fun about this. We are having discussions. We are certainly aware of the members who have conveyed a strong view about the SALT deduction, and we’ll have that discussion with them.”

Do you like this post?

Showing 1 reaction

published this page in News and Politics 2021-05-06 03:18:29 -0700