A5121

An Act increasing gross income tax rates for taxpayers with taxable income exceeding $2,000,000 and amending N.J.S.54A:2-1.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. N.J.S.54A:2-1 is amended to read as follows:

54A:2-1. Imposition of tax. There is hereby imposed a tax for each taxable year (which shall be the same as the taxable year for federal income tax purposes) on the New Jersey gross income as herein defined of every individual, estate or trust (other than a charitable trust or a trust forming part of a pension or profit-sharing plan), subject to the deductions, limitations and modifications hereinafter provided, determined in accordance with the following tables with respect to taxpayers' taxable income:

a. For married individuals filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes:

(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:

If the taxable income is: The tax is:

Not over $20,000.00.......... 2% of taxable income

Over $20,000.00 but not

over $50,000.00........ $400.00 plus 2.5% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00........ $1,150.00 plus 3.5% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00........ $1,850.00 plus 5.0% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00...... $2,350.00 plus 6.5% of the

excess over $80,000.00

Over $150,000.00 ............ $6,900.00 plus 7.0% of the excess over $150,000.00

(2) For taxable years beginning on or after January 1, 1994 but before January 1, 1995:

If the taxable income is: The tax is:

Not over $20,000.00...... 1.900% of taxable income

Over $20,000.00 but not

over $50,000.00....... $380.00 plus 2.375% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00...... $1,092.50 plus 3.325% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00....... $1,757.50 plus 4.750% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00....... $2,232.50 plus 6.175% of the

excess over $80,000.00

Over $150,000.00 .......... $6,555.00 plus 6.650% of the

excess over $150,000.00

(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.700% of taxable income

Over $20,000.00 but not

over $50,000.00........ $340.00 plus 2.125% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00........ $977.50 plus 2.975% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00........ $1,572.50 plus 4.250% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00...... $1,997.50 plus 6.013% of the

excess over $80,000.00

Over $150,000.00 ............ $6,206.60 plus 6.580% of the

excess over $150,000.00

(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:

If the taxable income is: The tax is:

Not over $20,000.00............ 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00......... $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00........ $805.00 plus 2.450% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00........ $1,295.50 plus 3.500% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00...... $1,645.00 plus 5.525% of the

excess over $80,000.00

Over $150,000.00 ............... $5,512.50 plus 6.370% of the

excess over $150,000.00

(5) for taxable years beginning on or after January 1, 2004 but before January 1, 2018:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00........ $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00........ $805.00 plus 2.450% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00....... $1,295.50 plus 3.500% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00...... $1,645.00 plus 5.525% of the

excess over $80,000.00

Over $150,000.00 but not

over $500,000.00...... $5,512.50 plus 6.370% of the

excess over $150,000.00

Over $500,000.00 ............ $27,807.50 plus 8.970% of the

excess over $500,000.00

(6) for taxable years beginning on or after January 1, 2018, but before January 1, 2020:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00...... $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00....... $805.00 plus 2.450% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00....... $1,295.50 plus 3.500% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00..... $1,645.00 plus 5.525% of the

excess over $80,000.00

Over $150,000.00 but not

over $500,000.00..... $5,512.50 plus 6.370% of the

excess over $150,000.00

Over $500,000.00 but not

over $5,000,000.00.. $27,807.50 plus 8.970% of the

excess over $500,000.00

Over $5,000,000.00 .......... $431,457.50 plus 10.75% of the

excess over $5,000,000.00

(7) for taxable years beginning on or after January 1, 2020 but before January 1, 2027:

If the taxable income is: The tax is:

Not over $20,000.00........ 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00.... $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00.... $805.00 plus 2.450% of the excess over $50,000.00

Over $70,000.00 but not

over $80,000.00... $1,295.50 plus 3.500% of the excess over $70,000.00

Over $80,000.00 but not

over $150,000.00.. $1,645.00 plus 5.525% of the excess over $80,000.00

Over $150,000.00 but not

over $500,000.00.. $5,512.50 plus 6.370% of the excess over $150,000.00

Over $500,000.00 but not

over $1,000,000.00.. $27,807.50 plus 8.970% of the excess over $500,000.00

Over $1,000,000.00... $72,657.50 plus 10.750% of the excess over $1,000,000.00

(8) for taxable years beginning on or after January 1, 2027:

If the taxable income is: The tax is:

Not over $20,000.00........ 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00.... $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00.... $805.00 plus 2.450% of the excess over $50,000.00

Over $70,000.00 but not

over $80,000.00... $1,295.50 plus 3.500% of the excess over $70,000.00

Over $80,000.00 but not

over $150,000.00.. $1,645.00 plus 5.525% of the excess over $80,000.00

Over $150,000.00 but not

over $500,000.00.. $5,512.50 plus 6.370% of the excess over $150,000.00

Over $500,000.00 but not

over $1,000,000.00.. $27,807.50 plus 8.970% of the excess over $500,000.00

Over $1,000,000.00 but not

over $2,000,000... $72,657.50 plus 10.750% of the excess over $1,000,000.00

Over $2,000,000.00 but not

over $5,000,000.00 $180,157.50 plus 12.00% of the

excess over $2,000,000.00

Over $5,000,000.00 but not

over $10,000,000.00 $540,157.50 plus 13.00% of the

excess over $5,000,000.00

Over $10,000,000.00 $1,190,157.50 plus 14.00% of the excess over $10,000,000.00

b. For married individuals filing separately, unmarried individuals other than individuals filing as head of household or as a surviving spouse for federal income tax purposes, and estates and trusts:

(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:

If the taxable income is: The tax is:

Not over $20,000.00.......... 2% of taxable income

Over $20,000.00 but not

over $35,000.00....... $400.00 plus 2.5% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00....... $775.00 plus 5.0% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00....... $1,025.00 plus 6.5% of the

excess over $40,000.00

Over $75,000.00 ........... $3,300.00 plus 7.0% of the

excess over $75,000.00

(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.900% of taxable income

Over $20,000.00 but not

over $35,000.00........ $380.00 plus 2.375% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00........ $736.25 plus 4.750% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00........ $973.75 plus 6.175% of the

excess over $40,000.00

Over $75,000.00 .......... $3,135.00 plus 6.650% of the

excess over $75,000.00

(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.700% of taxable income

Over $20,000.00 but not

over $35,000.00....... $340.00 plus 2.125% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00.......... $658.75 plus 4.250% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00....... $871.25 plus 6.013% of the

excess over $40,000.00

Over $75,000.00 .......... $2,975.80 plus 6.580% of the

excess over $75,000.00

(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00........ $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00........ $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00........ $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00............ $2,651.25 plus 6.370% of the

excess over $75,000.00

(5) for taxable years beginning on or after January 1, 2004 but before January 1, 2018:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00........ $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00........ $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00....... $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00 but not

over $500,000.00...... $2,651.25 plus 6.370% of the

excess over $75,000.00

Over $500,000.00 ............ $29,723.75 plus 8.970% of the

excess over $500,000.00

(6) for taxable years beginning on or after January 1, 2018, but before January 1, 2020:

If the taxable income is: The tax is:

Not over $20,000.00.......... 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00........ $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00........ $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00........ $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00 but not

over $500,000.00...... $2,651.25 plus 6.370% of the

excess over $75,000.00

Over $500,000.00 but not

over $5,000,000.00... $29,723.75 plus 8.970% of the

excess over $500,000.00

Over $5,000,000.00 .......... $433,373.75 plus 10.75% of the

excess over $5,000,000.00

(7) for taxable years beginning on or after January 1, 2020 but before January 1, 2027:

If the taxable income is: The tax is:

Not over $20,000.00...... 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00....... $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00...... $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00...... $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00 but not

over $500,000.00... $2,651.25 plus 6.370% of the

excess over $75,000.00

Over $500,000.00 but not

over $1,000,000.00.. $29,723.75 plus 8.970% of the excess over $500,000.00

Over $1,000,000.00.... $74,573.75 plus 10.750% of the

excess over $1,000,000.00

(8) for the taxable years beginning on or after January 1, 2027:

If the taxable income is: The tax is:

Not over $20,000.00...... 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00....... $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00...... $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00...... $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00 but not

over $500,000.00... $2,651.25 plus 6.370% of the

excess over $75,000.00

Over $500,000.00 but not

over $1,000,000.00.. $29,723.75 plus 8.970% of the excess over $500,000.00

Over $1,000,000.00 but not

over $2,000,000.00.... $74,573.75 plus 10.750% of the

excess over $1,000,000.00

Over $2,000,000.00 but not

over $5,000,000.00 $182,073.75 plus 12.000% of the excess over $2,000,000.00

Over $5,000,000.00 but not

Over $10,000,000.00 $542,073.75 plus 13.000% of the excess over $5,000,000.00

Over $10,000,000.00 $1,192,073.75 plus 14.000% of

the excess over $10,000,000.00

c. For the purposes of this section, an individual who would be eligible to file as a head of household for federal income tax purposes but for the fact that such taxpayer is a nonresident alien, shall determine tax pursuant to subsection a. of this section.

d. For the purposes of this section, for taxable year 2018, withholding by every employer from salaries, wages and other remuneration paid by an employer for services rendered described in subsections a. and b. of this section, in excess of $5,000,000 during that taxable year, shall be at the rate of 15.6% as soon as practicable but no later than September 1, 2018. The Director of the Division of Taxation is authorized to do all things necessary to implement the withholding tax prescribed by this section for taxable year 2018.

e. No additions to tax or penalty shall be imposed under N.J.S.54A:9-6 for insufficient payment of estimated tax that may otherwise be due on salaries, wages and other remuneration received before September 1, 2018, on which there is a rate of tax imposed pursuant to subsections a. and b. of this section.

f. An employer maintaining an office or transacting business within this State and making payment of any salaries, wages and remuneration subject to New Jersey gross income tax or making payment of any remuneration for employment subject to contribution under the New Jersey "unemployment compensation law," pursuant to R.S.43:21-1 et seq., that is subject to New Jersey gross income tax shall not be subject to interest, penalties or other costs that may otherwise be imposed for insufficient withholding of salaries, wages and other remuneration made before September 1, 2018, that is directly attributable to the enactment of the taxable income tables and tax rates in subsections a. and b. of this section.

(cf: P.L.2020, c.94, s.1)

2. This act shall take effect January 1, 2027 and apply to taxable years beginning on and after the date of enactment.

STATEMENT

This bill increases the gross income tax rates for taxpayers with taxable income over $2 million.

Under current law, the top marginal tax rate of 10.75 percent applies to taxable income over $1 million. Under the bill, this rate would only apply to taxable income over $1 million but not over $2 million. New graduated rates would apply to multimillion dollars of taxable income as follows: a rate of 12 percent for taxable income over $2 million but not over $5 million; a rate of 13 percent for taxable income over $5 million but not over $10 million; and a rate of 14 percent for all taxable income over $10 million. These rate increases would begin with taxable years beginning on and after January 1, 2027.