(The Center Square) — New Jersey Republicans are calling on the state’s Democratic leadership to prevent “bracket” creep by indexing the state’s personal income tax rates to inflation.
Senate Republican Leader Anthony M. Bucco said the Internal Revenue Service’s decision to raise the income thresholds for federal tax brackets “was a reminder that New Jersey is one of just a few states that doesn’t annually index our tax brackets for inflation.”
Bucco has filed a bill indexing New Jersey’s gross income tax brackets annually for inflation but says Democratic legislative leaders so far have blocked it.
“Unfortunately, legislation that would address this issue for state taxpayers has stalled in Trenton,” he said in a statement. “If Democrats fail to take action on the tax relief I have proposed, more New Jersey families will find themselves with higher state tax bills and smaller paychecks because of inflation.”
Two weeks ago, the IRS announced it would increase federal income tax brackets and standard deductions for 2024 to adjust for inflation. The income threshold for each bracket was bumped up for the next tax season.
The IRS also said it will increase the standard deduction to $29,200 for married couples who file jointly and $14,600 for single filers, among other changes.
Bucco pointed out that the federal government and a majority of other states have indexed income tax brackets to inflation, some for decades, making New Jersey an outlier.
He said tax bracket creep “resulting from New Jersey’s static tax rates” can impact working families when cost-of-living allowances paid by employers to cover inflation push them into a higher tax bracket.
“Failure to compensate for inflation will significantly impact poorer families and small business owners with lower levels of income,” he said. “All New Jersey families that are living day to day and paycheck to paycheck deserve relief.”
Republicans and business leaders have for years cited the need to lower taxes to prevent an exodus of businesses and workers fleeing for lower-tax states.
New Jersey lost an estimated 6,000 residents between July 2021 and July 2022, according to the latest U.S. Census Bureau estimates.
To be sure, Gov. Phil Murphy, a Democrat who was reelected to a second term on a pledge to cut taxes, has pushed through several tax relief proposals over the past year, including the sunsetting of a business tax surcharge as part of a broader agenda to shake the state’s high-tax reputation.
For more from Budget & Tax News.
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