LEGISLATIVE FISCAL ESTIMATE

SENATE, No. 3975

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: JANUARY 3, 2025

 

 

SUMMARY

 

Synopsis:

Provides gross income tax exclusion for military compensation paid to State residents for out-of-State military service.

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

Annual

 

State Revenue Loss

$4.4 million

 

 

 

 

·         The Office of Legislative Services (OLS) estimates that this bill will result in an annual State revenue decrease of approximately $4.4 million associated with excluding military compensation paid to certain active duty members from gross income taxation.

 

·         Based on current military deployment data and average military compensation, the OLS assumes approximately 11,162 active military members would qualify for the tax exclusion, with an average salary of approximately $35,000, subject to an effective gross income tax rate of 1.144 percent.

 

 

BILL DESCRIPTION

 

      This bill allows a gross income tax exclusion for military compensation paid to members of the United States Armed Forces who are domiciled in New Jersey but serve their military duty at a station or deployment outside of the State for a minimum of six months of the taxable year.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS estimates that this bill will reduce annual State revenues by approximately $4.4 million, associated with excluding military compensation paid to certain active duty members from gross income taxation.  

      Based on current military deployment data, the OLS estimates that approximately 11,162 active duty military members who are domiciled in New Jersey would qualify for the gross income tax exclusion, including approximately 3,880 service members who are deployed overseas and 7,282 service members who are deployed in other states.  For the purposes of this analysis, the OLS assumes that all service members deployed outside of New Jersey remained deployed for the minimum six-month period required by the bill to qualify for the exclusion, which may overstate the actual number of qualifying service members.

      Based on average military compensation data, the OLS assumes that each qualified service member receives an average military salary of $34,283, subject to an effective gross income tax rate of 1.144 percent, resulting in an average tax benefit of approximately $392 per qualifying service member, or roughly $4.4 million in total.

      However, the OLS notes that actual military compensation can vary significantly based on factors such as rank, years of service, and specific military occupation.  The use of an average salary may therefore either overstate or understate the true fiscal impact, depending on the actual distribution of salaries among New Jersey service members deployed outside the state.

 

 

Section:

Revenue, Finance, and Appropriations

Analyst:

Patrick Walsh

Associate 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.).