LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY, No. 10

STATE OF NEW JERSEY

214th LEGISLATURE

DATED: MAY 25, 2010

SUMMARY

Synopsis:	Increases gross income tax rate on income exceeding $1,000,000 for taxable year 2010.
Type of Impact:	Increase in Gross Income Tax revenue deposited into the Property Tax Relief Fund in FY 2011.
Agencies Affected:	Department of the Treasury.

Office of Legislative Services Estimate
Fiscal Impact	FY 2011
State Revenue (Property Tax Relief Fund)	$637,000,000

· The Office of Legislative Services (OLS) estimates this bill may increase income tax revenues deposited into the Property Tax Relief Fund by about $637,000,000 in FY 2011. However, the OLS notes that incomes and tax liabilities for taxpayers at very high levels of income are volatile and subject to significant changes from year to year.

· The bill would increase, for one tax year (TY 2010), the marginal rate on taxable income in excess of $1,000,000 by 1.78 percentage points.  Based on Tax Year 2007 resident taxpayer data, adjusting for estimated income changes in the three tax years since 2007, and including non-resident taxpayers, the OLS estimates that about $35.8 billion of taxable income may be subject to the marginal rate change in this bill.  $35.8 billion x 1.78 percent = $637 million.

BILL DESCRIPTION

      Assembly Bill No. 10 of 2010 provides a temporary adjustment to the rate of the gross income tax for taxpayers with taxable incomes exceeding $1,000,000 in taxable years beginning on or after January 1, 2010 but before January 1, 2011 (the "taxable year 2010"). The bill provides for adjusted income taxation at the following bracket at the following rate: over $1,000,000 is adjusted from 8.97 percent to 10.75 percent.  The bill would remain inoperative until the date of enactment of Assembly Bill No. 20 of 2010.

FISCAL ANALYSIS

EXECUTIVE BRANCH

      None received.

OFFICE OF LEGISLATIVE SERVICES

The OLS estimates this bill may increase income tax revenues deposited into the Property Tax Relief Fund by about $637,000,000 in FY 2011.  This estimate is based on extrapolations from Tax Year 2007 Statistics of Income publication from the Division of Taxation. This amount is consistent with Treasury estimates for the impact of a similar rate increase in FY 2010, and is consistent with OLS extrapolations of an informal review of the Division’s Tax Year 2008 sample data.  However, the OLS notes that incomes and tax liabilities for taxpayers at very high levels of income are volatile and subject to significant changes from year to year.

The bill would increase, for one tax year (TY 2010), the marginal rate on taxable income in excess of $1,000,000 by 1.78 percentage points.  Based on Tax Year 2007 resident taxpayer data, adjusting for estimated income changes in the three tax years since 2007, and including non-resident taxpayers, the OLS estimates that about $35.8 billion of taxable income may be subject to the marginal rate change in this bill.  $35.8 billion x 1.78 percent = $637 million.  According to the TY 2007 statistics, there were about 17,800 filers that reported having taxable income above $1,000,000.

While the marginal rate change applies to all of Tax Year 2010, implementation is unlikely to begin prior to the end of Fiscal Year 2010.  Therefore, the full revenue impact should accrue to FY 2011, and be realized primarily at the April 2011 year-end filing deadline.

Section:	Revenue, Finance and Appropriations
Analyst:	Martin Poethke  Lead Fiscal Analyst
Approved:	David J. Rosen Legislative Budget and Finance Officer

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).