In the midst of the NJ millionaire tax debate it is useful to look at what the higher rates mean in terms of dollars to individual taxpayers, what they mean in total dollars to the state government, and what one millionaire feels about the usefulness of higher taxation.
For tax year 2009 the New Jersey gross income tax rates increased over 2008 with increasingly higher rates for taxpayers with income over $400,000 but not over $500,000; over $500,000 but not over $1,000,000; and over $1,000,000. For tax year 2010 the gross income tax rates will revert to the rates for tax year 2008 unless a new law is passed.
What this means dollar-wise for individual taxpayers is not as much as you might think. For taxable income below $400,000 the tax for 2008 and 2009 was the same. For $450,000 in taxable income the tax in 2008 was $26,539 and in 2009 $27,354. For $550,000 in taxable income the tax in 2008 was $34,209 and in 2009 $36,479. For $1 million in taxable income in 2008 the tax was $74,574 and in 2009 $82,604. In effect, for the following income the increases are $815 on $450,000, $2,270 on $550,000, and $8,030 on $1,000,000. You be the judge of whether these amounts would have a significant impact on wealthy individuals.
Cumulatively for state government it means about an extra $1 billion. Such an amount could restore all or parts of cuts in women’s health clinics, transit fares, universities, TAG grants, libraries, PAAD for senior citizens, AIDS prescription drugs, Hagedorn Psychiatric Hospital, aid for the disabled, aid for grandparents raising kids, and welfare checks. It could also provide monies to reduce cuts in school and municipal funding and permit a modest contribution to the pension fund.
As recently reported in the Record, one NJ millionaire almost a decade ago, Eric Schoenberg of Franklin Lakes decided that the Bush tax cuts were a bad idea, even though he stood to benefit personally from them, so he started donating the money he saved through the tax cuts to charity. He says, “My fundamental argument is that what’s in my best long-term self-interest is that we have a well-functioning society. I have two daughters, 14 and 16, and I believe it’s more important for them that they grow up in a society that works for everybody. These Bush tax cuts are coming from one of the few groups in society that really wouldn’t miss the money.”