TRENTON – A $1.4 billion increase in projected income tax collections in the current and upcoming fiscal years is due in large part to an increase in wealthy taxpayers, Office of Legislative Services Budget Officer David Rosen told the Assembly Budget committee Tuesday.
Rosen told the committee that a 33 percent decline in the state’s wealthiest taxpayers between 2007 and 2009 has reversed itself, leading to the projected income tax windfall. Rosen believes the change in the number of millionaires filing had more to do with their change in income, largely based on investments, rather than “outward migration.”
Whether millionaires will flee the state if the high earners tax that was in place earlier this decade is reinstated has been a subject of debate in Trenton. Gov. Chris Christie contends the imposition of the tax that was allowed to lapse by the Democratic-controlled Legislature last year would send millionaires running, but Democrats – as well as various academic studies – say there is no data to back that up.
“The takeaway from these facts is that while the recession has had terrible consequences for many middle- and lower-income New Jersey residents, it was the loss of income for wealthier New Jerseyans that sunk our income tax collections,” Rosen told the committee. “And it is the flip side of that coin that is appearing in our revenue collections now.”
The increase in income tax collections will be partially offset by a more than $400 million shortfall in corporate business tax collections over the same two fiscal years.
According to the latest figures from OLS, the fiscal year 2011 business tax projection is $2.2 billion, $190 million less than originally anticipated in the Governor’s Budget Message. The state now expects to collect $2.303 billion for fiscal year 2012, or about $253 million less than the governor’s office forecasted.
Rosen stressed to the committee that while those figures were off from the governor’s initial projections, total corporate business tax collections are “positive,” with 5 percent growth this year and 7 percent next year for 2012.
While Rosen said decisions about how to spend the money will be made by elected officials, he recommended putting some of that money toward the budget surplus fund, which he said, is currently of a “small size.” The budget chief said the state should carry at least $900 million – or 3 percent of the total budget in surplus. The proposed fiscal year 2012 budget calls for a surplus of $303 million.
Rosen said unemployment remains a big issue as the number of jobs being created remains below the number of people who are looking for a job. While there has been growth, there hasn’t been enough of it, he said.