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CPAs Take Dim View of Governor Murphy's Proposed Budget

 – May 29, 2018
CPAs Take Dim View of Governor Murphy

ROSELAND, N.J. — Nearly 75 percent of the 786 CPAs who responded to a New Jersey Society of CPAs’ (NJCPA) survey this month said New Jersey’s economy would either get “significantly worse” (44 percent) or “marginally worse” (31 percent) over the long term under Governor Murphy’s proposed budget plan. Only 14 percent said it would end up better.

Respondents mostly blamed high taxes on corporations and individuals as a reason for the negative sentiment, which they said could eventually lead to more unemployment and an exodus of businesses and individuals from the state.

Overall almost 55 percent of the respondents rated the state’s current economy at “fair,” compared to 28 percent who said it is “good,” and 17 percent who said it’s “poor.” Only 1 percent rated the current economy as “excellent.”

Actions that were cited by respondents to improve the state’s economy included less regulation, lower marginal tax rates, repealing mandatory sick leave legislation, decoupling the school funding formula from property taxes, streamlining the police forces in the state and converting pension plans to 401(k) retirement accounts. Respondents backed a concerted effort to make the state more attractive to businesses and an overall desire to reduce borrowings.

Those who believed a positive outcome could come from the proposed budget cited Governor Murphy’s plans to tax millionaires, increase the real estate tax deduction, improve infrastructure, legalize recreational marijuana and allow New Jersey students to attend community colleges for free.

“The survey is a telling sign of what is keeping accountants up at night. They are deeply concerned about the economy and getting New Jersey back on track for both individuals and businesses,” said Ralph Albert Thomas, CEO and executive director at the NJCPA.

In a breakdown by region, 45 percent of respondents live in Northern New Jersey (Bergen, Essex, Hudson, Morris, Passaic, Sussex, Union or Warren county), 38 percent reside in Central New Jersey (Hunterdon, Mercer, Middlesex, Monmouth, Ocean or Somerset county), while 14 percent live in Southern New Jersey (Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester or Salem county).

 
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The New Jersey Society of Certified Public Accountants, with more than 15,000 members, represents the interests of the accounting profession and advances the financial well-being of the people of New Jersey. The NJCPA plays a leadership role in supporting the profession by providing members with educational resources, access to shared knowledge and a continuing effort to create and expand professional opportunities.Visit njcpa.org.


Watch as NJCPA's Jeff Kaszerman and Ralph Albert Thomas discuss New Jersey's fiscal year 2019 budget — tax increases, how we got here and what happens now:

 

Recent New Jersey Income Tax Changes

 – August 13, 2018
Recent New Jersey Income Tax Changes

New legislation signed into law on July 1, 2018, made several changes to the New Jersey Gross Income Tax Act at N.J.S.A. 54A:1-1 et seq. as part of New Jersey’s fiscal year 2019 budget. The changes include increases in the New Jersey Earned Income Tax Credit and the property tax deduction, and the addition of a new Child and Dependent Care Credit for resident taxpayers.

The law also increased the income tax rate for income over $5,000,000. More information about the tax rate increase is available in this notice.

These changes affect the returns that taxpayers will file beginning in tax year 2018.

Earned Income Tax Credit (EITC)

Currently, qualified taxpayers are eligible for a New Jersey EITC equal to 35 percent of their federal earned income credit. The new law increases the percentage as follows:

  • 37 percent in tax year 2018
  • 39 percent in tax year 2019
  • 40 percent in tax year 2020 and thereafter

Read more

Property Tax Deduction

Qualified homeowners and tenants are eligible for a deduction for property taxes they paid for the calendar year on their New Jersey principal residence. The new law increases the maximum Property Tax deduction from $10,000 to $15,000. 

Read more

Child and Dependent Care Credit

The law creates a new gross income tax credit for eligible resident taxpayers who are allowed a federal credit for expenses they incur for the care of one or more qualifying individuals. A qualifying individual can be a child under age 13 or a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.

The credit will reduce the amount of New Jersey Gross Income Tax a taxpayer owes, but won’t result in a refund if no taxes are owed. Taxpayers may be able to claim the New Jersey Child and Dependent Care Credit if they:

  • Paid expenses for the care of one or more qualifying individuals so that they are able to work or actively look for work;
  • Are allowed the federal child and dependent care credit; and
  • Have New Jersey taxable income of $60,000 or less.

The amount of the New Jersey credit is a percentage of the taxpayer’s federal child and dependent care credit and varies according to the amount of the taxpayer’s New Jersey taxable income.

If NJ taxable income is: Amount of the NJ credit is:
Not over $20,000    50% of federal credit
over $20,000 but not over $30,000    40% of federal credit
over $30,000 but not over $40,000    30% of federal credit
over $40,000 but not over $50,000   20% of federal credit
over $50,000 but not over $60,000    10% of federal credit

The maximum New Jersey credit cannot exceed $500 for one qualifying individual or $1,000 for two or more qualifying individuals.

Carried Interest

In addition to the above, the new law also provides for the taxation of certain investment management services, also known as “carried interest.” However, those provisions do not take effect unless and until Connecticut, New York and Massachusetts enact laws which do the same thing. Because those states have not enacted similar laws, and they are not expected to do so in the near future, those provisions remain inactive.