LEGISLATIVE FISCAL ESTIMATE
SENATE, No. 1200
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: AUGUST 22, 2024
SUMMARY
|
Synopsis: |
Allows a gross income tax deduction for certain higher education tuition and fee expenses. |
|
Type of Impact: |
Annual State revenue loss. |
|
Agencies Affected: |
Department of the Treasury. |
|
Fiscal Impact |
|
|
Annual State Revenue Loss |
$75.5 million to $132.4 million |
· The Office of Legislative Services (OLS) estimates that this bill will result in an annual State revenue loss between $75.5 million and $132.4 million.
· The estimate assumes that around 408,000 taxpayers will be eligible to claim an average gross income tax deduction of $8,104 per year.
· The OLS notes taxpayers will see widely varying benefits from the tax deduction, as the State marginal tax rates for taxpayers with gross income of $85,000 or less range from 1.4 percent to 6.37 percent.
BILL DESCRIPTION
This bill allows a gross income tax deduction for certain higher education tuition and fee expenses paid by taxpayers with annual gross income of $85,000 or less. The deduction would apply to expenses paid for the taxpayer, the taxpayer’s spouse, and the taxpayer’s dependents who are matriculated students at an accredited public or independent institution of higher education. The bill would take effect immediately and apply to taxable years commencing after the date of enactment.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS estimates that this bill will result in an annual State revenue loss between $75.5 million and $132.4 million beginning in the first full fiscal year following enactment.
Approximately 70 percent of resident gross income taxpayers have a gross income of $85,000 or less. The United States Census Bureau reports that 582,358 students in New Jersey are enrolled in an undergraduate or graduate program. Using these figures, the OLS estimates that the tax deduction would be available for tuition and fee expenses paid on behalf of 407,651 students.
Data from the National Center for Education Statistics indicate that individuals with gross incomes under $85,000 spend an average of $8,104 on qualifying higher education expenses. Tuition and fees include expenses paid for the taxpayer, the taxpayer’s spouse, and the taxpayer’s dependents who are matriculated students at an accredited public or independent institution of higher education. These expenses typically cover costs directly related to enrollment and attendance, such as tuition, mandatory fees, and course-related fees. They do not include other costs like room and board, textbooks, or transportation. This definition of qualifying expenses is relevant to the anticipated average deduction because it establishes the specific costs that taxpayers can claim, thereby directly affecting the potential tax benefit and resulting State revenue loss. By applying these anticipated average deductions to the average gross income tax rate for single and joint filer taxpayers, the OLS projects that the annual State revenue loss resulting from this bill would range from $75.5 million to $132.4 million.
|
Section: |
|
|
Analyst: |
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.).