FY2009 Incremental change in EITC ($60 million); Tax Amnesty of $88.9 million FY2010 Incremental change in EITC ($9.9 million); EITC federal reimbursement ($150 million); Millionaire’s tax enacted FY2011 Income tax surcharge expired FY2012 includes $23.0 million in tax cuts CAFR – Comprehensive Annual Financial Report
For fiscal year 2012, the Gross Income Tax is expected to yield approximately $10.5 billion, a $452 million increase over the revised estimate for fiscal year 2011, but trailing below the fiscal year 2008 peak of $12.6 billion. The projected 4.5% increase, based on moderately higher-than-expected receipts observed to date for fiscal 2011, primarily reflects growth in income. New Jersey’s total income that is subject to the income tax apparently bottomed out in tax year 2010 after the steep decline of 9.5% in tax year 2009, and it is anticipated to grow moderately in 2011 and 2012.
Aside from the rise in total income, it is important to note that households reporting over $100,000 in taxable income (only 20% of New Jersey taxpayers) account for more than 85% of the State’s income tax revenue. The earnings of these households apparently dropped dramatically during the recession, as the financial industry contracted and other firms cut back on incentive pay and bonuses. These declines exerted a disproportionate impact on New Jersey’s revenues due to our highly progressive income tax. It appears that upper income household earnings have recently started to rebound. Income of households earning more than $100,000 is estimated to have grown by 4.6% in tax year 2010, and the pace is expected to increase to 7.8% in tax year 2011. While these rates are still significantly below the double-digit annual gains experienced from 2004 to 2007, the positive swing will be a growth factor for income tax revenues. Nonetheless, the level of income tax revenues forecast for both fiscal years 2011 and 2012 is sensitive to the still uncertain flow of final payments and refunds for tax year 2010, which follows the expiration of tax year 2009’s one-year tax hike on high income taxpayers and small businesses.
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