LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY, No. 3416

STATE OF NEW JERSEY

221st LEGISLATURE

SUMMARY

DATED: JUNE 25, 2024

 

 

Synopsis:

Provides gross income tax deduction to eligible educators and paraprofessionals for expense of classroom supplies.

Type of Impact:

Annual State revenue loss to the Property Tax Relief Fund.

Agencies Affected:

Department of the Treasury.

 

Office of Legislative Services Estimate

Fiscal Impact

 

Tax Year 2025 and Annually Thereafter

 

 

State Revenue Loss

Between $1.3 million and $2.4 million

 

 

 

 

·         The Office of Legislative Services (OLS) estimates that this bill would result in annual State revenue losses of between $1.3 million and $2.4 million.  The OLS primarily bases its estimate on State taxpayers’ claims of the federal educator expense tax deduction from tax years 2016 through 2020.

 

BILL DESCRIPTION

 

      This bill provides a State gross income tax deduction, not to exceed $250 for a taxable year, to eligible educators and paraprofessionals working in a New Jersey elementary or secondary school for unreimbursed expenses incurred by the educator or paraprofessional for classroom supplies.  An eligible educator is defined under the bill as an individual who is employed as a kindergarten through grade 12 teacher, instructor, counselor, speech language specialist, or principal by a public or private school for at least 900 hours during a school year.  The bill defines a paraprofessional as an individual who is employed as a school aide or classroom aide that assists a teaching staff member with the supervision of pupil activities by a public or private school that provides elementary education or secondary education.  Classroom supplies are defined under the bill as books, computer equipment, including related software and services, and other equipment, supplies, and supplementary materials used by an eligible educator or paraprofessional in the classroom.

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS estimates that this bill would result in annual State revenue losses of between $1.3 million and $2.4 million.  Since the tax deduction established under the bill is largely modeled off of the federal educator expense tax deduction, the OLS bases its estimate on State taxpayers’ claims of the federal deduction from tax years 2016 through 2020.  Over this timeframe, an eligible educator was permitted to claim up to $250, or $500 if married filing jointly and both spouses are eligible educators, of unreimbursed qualified expenses. 

      Using State-specific data from the Internal Revenue Service’s Statistics of Income from tax years 2016 through 2020, the OLS calculates that an average of 146,502 taxpayers annually claimed an average of $38.2 million through the federal educator expense deduction.  Given that eligibility for the tax deduction under the bill is more expansive than the federal deduction in that it does not require paraprofessionals to work for at least 900 hours during a school year, the OLS first assumes that an average of 150,000 taxpayers will claim the deduction.  On top of this figure, the OLS uses May 2022 State Occupational Employment and Wage Estimates from the United States Bureau of Labor Statistics to project that 2,157 speech-language pathologists work in elementary and secondary school settings in the State.  In total, the OLS estimates that 152,157 taxpayers will annually claim the deduction under the bill.  

      Since the bill permits a maximum $250 deduction regardless of income tax filing status, the OLS estimates that taxpayers would annually deduct a total of $38.0 million if the bill is enacted.  Assuming that most of these taxpayers will pay between a 3.5 percent and 6.37 percent marginal tax rate, the annual revenue loss to the State would be between $1.3 million and $2.4 million.  The OLS notes that, while it is expected that the majority of eligible taxpayers will pay a marginal income tax rate of between 3.5 percent and 6.37 percent, a certain level of taxpayers may be subject to tax rates that are outside of this range. 

 

 

Section:

Revenue, Finance, and Appropriations

Analyst:

Patrick Walsh

Assistant Fiscal Analyst

Approved:

Thomas Koenig

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.).