Tax credit fix in the works

JOHN REITMEYER, BUDGET/FINANCE WRITER | SEPTEMBER 28, 2022 

NJ Spotlight News

New Jersey State House

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State lawmakers have officially launched a redo of their effort to establish a child tax credit in New Jersey.

Under legislation scheduled to go before the Senate on Thursday, households earning up to $80,000 annually with children under six years old would be able to collect tax credits next year when they file their tax returns for 2022.

The bill is needed to fix what appears to have been a mistake made in late June as a new state budget and dozens of other bills were rushed to the finish line in Trenton with little time for a thorough, public review.

During the flurry of activity, a last-minute amendment to the child tax credit legislation changed the effective date of the new tax break to the 2023 tax year.

Without the pending revision, which has also been introduced in the Assembly, people eligible to receive the credit — totaling as much as $500 per child, depending on annual income — would have to wait until 2024 to receive their benefits.

Original intention

The effort to establish a state-level child tax credit was hailed earlier this year by liberal groups who said it would make raising a child more affordable in a state known for a high cost of living.

But it drew immediate criticism from Republicans. They pointed out how long it would take to provide the tax breaks under the bill adopted by their majority Democratic counterparts and signed into law by Gov. Phil Murphy in late June.

In a statement issued in early July, Murphy and the lawmakers who sponsored the original effort to establish the child tax credit said it had been their “full intention” to make the tax break applicable to the 2022 tax year. They also promised a fix would be forthcoming.

One of those original bill sponsors, Senate Majority Leader Teresa Ruiz (D-Essex), said Tuesday that the new legislation will “make sure that the child tax benefits are made available to families as quickly as possible.”

“We are keeping the promise we made to provide much needed financial support to families in a timely way,” said Ruiz, who in recent months has spearheaded other efforts to address child care concerns in New Jersey.

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.

Argument for the tax break

But a push to build on that tax break by also offering a per-child tax credit in New Jersey was launched earlier this year after 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 helped to combat childhood poverty.

A report published in February by New Jersey Policy Perspective, a left-leaning think tank based in Trenton, suggested a state-level tax break would be an effective way to address New Jersey’s high rates of poverty and income inequality.

“A state-level child tax credit would recognize the unique costs of raising children and help families set their kids up for success,” the report said.

In May, lawmakers in both houses introduced legislation that called for giving new state tax breaks to families with children under the age of six, citing the success of the credits funded by the American Rescue Plan Act.

The original versions of both the Senate and Assembly legislation said the state-level tax credits would go into effect immediately.

Why a fix is needed

But the bill would undergo several changes before Murphy signed it in late June, including the amendment that said the tax credit would begin with the 2023 tax year instead of immediately.

The final version of the bill, which was easily adopted in late June, allowed those earning up to $30,000 annually to be eligible for $500 per-child tax credits. For those earning between $30,000 and $40,000 annually, the credits totaled $400; those earning between $40,000 and $50,000, a total of $300; between $50,000 and $60,000, credits of $200; and those earning between $60,000 and $80,000 annually would be eligible for per-child credits totaling $100.

Only after the bill became law — and criticized by Republicans — was  a statement issued by Murphy, a second-term Democrat, and legislative leaders and sponsors that promised to move up the effective date to the 2022 tax year.

The legislation introduced last week in both the Senate and Assembly would deliver on that promise by making clear those who qualify for the tax break can collect their credits when they file their state tax returns in early 2023. A vote in the Assembly is scheduled for Monday. Making the change now means no one will be affected by the initial mix-up.

“We are committed to providing New Jerseyans with immediate tax relief, and this legislation clarifies that the child tax credit begins this year,” said Cecilia Williams, a spokeswoman for Assembly Speaker Craig Coughlin (D-Middlesex).

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published this page in News and Politics 2022-09-28 02:31:19 -0700