NEW JERSEY – New Jersey Democrat lawmakers came to a deal with their governor last night – agreeing to raise state income tax rate for those making $1 million a year and more to 10.75%. Calling it the "Millionaire's Tax," New Jersey lawmakers say because of the budget deficit aggravated by dramatic dips in revenue attributed to COVID pandemic, there's a serious need for more taxpayers to carry the load.
"The new income tax — part of a $32.4 billion spending plan that [New Jersey] lawmakers are set to approve by the end of the month — will increase the number of people who pay the state’s top marginal rate of 10.75% by extending it to those who earn between $1 million and $5 million a year," the New York Post writes.
Those New Jersey taxpayers making $5 million and more now pay 8.97%, while anyone earning more than $5 million already pays the higher rate.
New Jersey’s millionaires comprise less than 3% of its taxpayers, but they provide more than 40% of the Garden State’s income tax revenues, northjersey.com reported last year.
"That's exactly what's going to happen in Illinois," said Dennis LaComb, vice president of the Technology & Manufacturing Association.
The group is leading an effort for Illinoisans to "Vote No" on a November ballot initiative. The initiative will allow Illinois' Democrat-controlled General Assembly to dictate a state income tax schedule rather than be required to abide by the state's current flat tax rate.
In 2019, New Jersey was ranked the highest in the country for residents moving out of state. New Jersey Republicans point to "the unending tax increases and excessive spending under the Murphy administration in his effort to turn New Jersey into the next California."
“For far too long New Jerseyans have watched as Governor Murphy slashed school funding, increased the minimum wage and catered to undocumented immigrants,” stated the NJ Senate Republicans in a Shore News Network story earlier this year. “Our property taxes are astronomical and the overall cost of living and running a business in this state has forced residents to move elsewhere. The Governor’s extreme measures in response to the Coronavirus pandemic have left a lasting impact on our state’s economy which will leave a lasting impact for years to come.”
Anti-tax hikes groups like the coalition in which the Technology & Manufacturing Association is involved predict that Illinois Governor JB Pritzker's reported plan to raise taxes for only those that make $250,000 and more a year will not ultimately protect those taxpayers making less.
"Those making less than $250,000 a year should not feel like they won't get hit with higher taxes, because ultimately, they will. It's happening in New Jersey now, where they made those making over $5 Million pay more, and now they're lowering that incredibly high rate down to those making $1 Million. It won't stay there, either," LaComb said.
The choice for many financially-successful people leaving Illinois and New Jersey is to head for lower or non-income tax states like Florida.
According to the 2019 National Movers Study, Illinois was right behind New Jersey as being the second most moved-out of state in the U.S. More residents moved out of Illinois than into the state, with nearly 66 percent of moves being outbound.
But focusing on millionaires is misguided, several Illinois manufacturers have said in videos urging a "no" vote on the November ballot. It will affect employers' options of what they can do for their employees, said Nicole Wolter of HM Manufacturing in Wauconda, Illinois.
“We’re family. It’s imperative that I know what they’re going through,” she said. “And now with COVID, I wasn’t able to give bonuses, I wasn’t able to give raises because profits and sales are not there to support it. It’s about staying in business and making sure we have orders for the team to run.”
And that’s a real problem for the HM Manufacturing family, she said.
“The more that I am getting taxed, the harder it will be for me to help them grow and help their families. I know everyone needs to be fed, needs a home to live in,” she said. “Before COVID and the idea of higher taxes the progressive tax system would bring, people were buying cars and homes, they were able to grow and expand within the community.”
Wolter's comments are echoed by other jobs providers in Illinois, like Atlas Tool Works' Althea Mottl.
“We’re in Cook County where property taxes are already some of the highest in the nation. Like other businesses, we pay state income taxes for our employees. Being hit with higher state income taxes would affect what we can offer in wages and benefits,” Mottl, whose company is in Cook County's Lyons, said.
“We are competing with big corporations for the best employees, and another tax hike would definitely make it more difficult to offer benefits that make us competitive.”
The effort to eliminate the Illinois Constitution's flat tax will be on the November 3, 2020 ballot. If it passes, any future state income tax rate changes will be made by the General Assembly without input from the voters.
