On the hottest weekend of the year, New Jersey avoided a shutdown of its parks, beaches, and everything else, by raising the price of admission for millionaires. Who can forget the photos of former Governor Christie sitting on the closed State Beach with family in tow? Hoping to avoid another such photo opportunity, just hours before the deadline, with a government shutdown looming, Governor Phil Murphy and legislative leaders struck a budget deal.
The key point of contention, a so-called millionaire’s tax, was agreed to. Beginning for tax years on or after January 1, 2018, those earning $5 million or more will see a top tax rate increase to 10.75% from the current 8.97%. The Governor was pushing for a $1 million rate differential. Just so corporations won’t feel left out, a four-year surcharge will be imposed on companies earning in excess of $1 million per year. The current rate of 9% will be increased by 2.5% for the first two years. The rate increase will be phased out over the subsequent two years until returning back to 9%.
There is some good news for taxpayers. The sales tax rate will remain at the current 6.625% rate. Governor Murphy stated that the increase was not needed due to the expected increase in revenue from the Supreme Court’s recent decision in Wayfair. Murphy was pushing lawmakers for a return to the former 7%.
An amnesty period for unpaid taxes is mandated by the budget covering New Jersey taxes due and owing between 2009 and the present. The start date has not been determined, but the program would be no more than 90 days in duration and mandated to end by January 15, 2019. In addition to waiver of penalties, interest will be cut in half.
Uber and other ride sharing users should be expecting new surcharges, Airbnb and similar services will be subject to the sales tax and other hotel surcharges, shopping bags (both paper and plastic) will be subject to a 5 cent tax and liquid nicotine will be subject to a tax as well.
The legislation was enacted on Sunday and more details will be emerging. If you have questions, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.
Wayne K. Berkowitz, CPA, J.D., LL.M., a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises clients on the unique requirements of governments and municipalities across the nation.