New Jersey Debt
The state of New Jersey now has the highest debt burden per taxpayer in the U.S., according to Truth in Accounting research cited by a NJ 101.5 report. The data collected in the report showed that New Jersey also has the highest property taxes in the nation on average. All told, the report stated that New Jersey has $28.6 billion in assets, with more than $185 billion in liabilities. In turn, according to a MyCentralJersey.com report, the state expects to have its local property taxes increase to $540 million by the end of the year, which will break down to approximately $52,300 per taxpayer.
New Jersey’s rising tax burden
Critics have argued that following several administrations that relied heavily on loans, the rising debt totals have contributed to the tax burden. The Truth in Accounting report examined the tax debts of each state and calculated the amounts of money the state would need to pay off those debts, divided by the number of residents in those states. With these calculations, the researchers found that New Jersey saw its tax burden jump to $52,300, $4,000 higher per taxypayer than Connecticut, the second-worst tax-burdened state. According to an NJ 101.5 interview with Assembly Republican Leader Jon Bramnick, R-Westfield, these tax burdens continue to rise despite stiffer taxes on high net worth individuals.
The New Jersey debt burden per individual increased from $36,000 in 2014. Bramnick stated that part of the reason for this increase was due to the staggering liability as a result of the state’s unfunded public employee pensions. Bramnick commented that of the $186 billion the state owes, $140 billion is for retirement benefits plans.
Without sufficient assets to cover the mounting debt, New Jersey is facing stiffer tax burdens in the near future, particularly for the high net worth community.
What this could mean for high net worth taxpayers in the future
As the state’s new business development has slowed in recent years, the New Jersey state legislature has discussed increasing income and estate tax rates on millionaires; however, the amounts at which the highest rates kick in are well below one million dollars.
It has been suggested that New Jersey may follow the path taken in California with its famous Proposition 13 that limited property tax increases. What is clear that property taxes are a substantial portion of municipal revenue and there is no substitute source of revenue at the present time.
New Jersey, with 565 municipalities, is famous for home rule which means those municipalities will not relinquish their taxing authority. Second, the state relies upon existing sources of revenue and cannot abandon them in this time of fiscal deficits and extraordinary liability. New Jersey death taxes reportedly raise $800 million of revenue each year, so the $675,000 estate tax threshold and the inheritance tax on collateral heirs are fixtures. Sales tax, perhaps the most regressive of taxes, will remain another substantial source of state revenue as long as the extraordinary pension liability remains unpaid.