On a recent visit to the website of the Tax Foundation, I was taken aback, but not surprised, to read “New Jersey’s tax system ranks 50th overall on our 2023 State Business Tax Climate Index”. This Index is designed to show how well states structure their tax systems to encourage the maintenance and growth of population and business. The states faring worst in the Index have “complex, non-neutral taxes with comparatively high rates”.
Per the Foundation, the most glaring negative in New Jersey is the highest property tax burden in the country. But it doesn’t stop there. New Jersey also has the highest corporate tax rate and has a high personal income tax rate as well. And don’t forget the inheritance taxes we wrote about in the last issue.
While those taxes are high, we expect them. We’re not surprised when we have to pay sales taxes (but are sometimes surprised when a purchase isn’t taxable). In New Jersey over 45% of taxes collected are property taxes, about 15% are sales taxes, 22% are income taxes, 5% are corporate taxes, but 12% are “other taxes” that are not always so obvious. What would those be?
Who knew there was an excise tax on beer? NJ is #42 at $.12 per gallon. Another sin tax is on cannabis. This is a new source of revenue for states, and New Jersey was quick to tax. I have, for years, loved reading the newsletter put out by the Division of Taxation because there was always at least one story about raids to seize untaxed cigarettes. New Jersey taxes at $2.70 for a package of 20. And you can’t vape to avoid taxes, because that’s taxed too!
In this time of dwindling landlines, who does not have a cellphone? That service is rife with taxes, both federal and state. In 2022 the federal tax rate was 12.24%, and New Jersey tacked on another 9.14%.
Been to the pump lately? In 2016 the legislature passed a substantial increase in the gasoline tax in an effort to replenish the Transportation Trust Fund. That tax will increase next month to $.318 per gallon (on top of the federal taxes imposed). Every now and then there’s talk of a moratorium, but that’s not very likely to happen.
I think we’ve hit the highlights, but we must not forget payroll taxes. Both the employer and employee in New Jersey are subject to payroll taxes. When an employee works in New Jersey the following usually apply:
- .3825% for Unemployment Insurance
- .0425% for Workforce Development/Supplemental Workforce Funds
- .06% for Family Leave Insurance (FLI)
The wage base, which is the maximum amount of an employee’s income that can be taxed per year, for the first two above is $41,100, but this year the wage base for FLI is up to $156,800. Rates and the wage bases are changed annually, and every now and then a new payroll tax is added.
Good thing we love where we live!
Article Submitted by Lois S. Fried, CPA, CFE, CVA, ABV.