New Jersey 2022-2023 Regular Session

New Jersey Assembly Bill A2058 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	ASSEMBLY, No. 2058 STATE OF NEW JERSEY 220th LEGISLATURE INTRODUCED FEBRUARY 3, 2022
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3	3	ASSEMBLY, No. 2058
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7	7	STATE OF NEW JERSEY
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9	9	220th LEGISLATURE
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13	13	INTRODUCED FEBRUARY 3, 2022
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17	17	Sponsored by: Assemblywoman NANCY F. MUNOZ District 21 (Morris, Somerset and Union) Assemblyman JOHN DIMAIO District 23 (Hunterdon, Somerset and Warren) Assemblyman HAROLD "HAL" J. WIRTHS District 24 (Morris, Sussex and Warren) Co-Sponsored by: Assemblyman Space, Assemblywoman Dunn, Assemblymen McGuckin, S.Kean, Clifton, Peterson, McClellan, Assemblywoman Matsikoudis, Assemblyman Guardian, Assemblywomen Piperno, Eulner, Assemblymen Torrissi, Umba, Assemblywoman Swift, Assemblyman Dancer and Assemblywoman Sawyer SYNOPSIS Indexes for inflation taxable income brackets under New Jersey gross income tax. CURRENT VERSION OF TEXT As introduced.
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21	21	Sponsored by:
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23	23	Assemblywoman NANCY F. MUNOZ
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25	25	District 21 (Morris, Somerset and Union)
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27	27	Assemblyman JOHN DIMAIO
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29	29	District 23 (Hunterdon, Somerset and Warren)
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31	31	Assemblyman HAROLD "HAL" J. WIRTHS
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33	33	District 24 (Morris, Sussex and Warren)
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37	37	Co-Sponsored by:
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39	39	Assemblyman Space, Assemblywoman Dunn, Assemblymen McGuckin, S.Kean, Clifton, Peterson, McClellan, Assemblywoman Matsikoudis, Assemblyman Guardian, Assemblywomen Piperno, Eulner, Assemblymen Torrissi, Umba, Assemblywoman Swift, Assemblyman Dancer and Assemblywoman Sawyer
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49	49	SYNOPSIS
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51	51	Indexes for inflation taxable income brackets under New Jersey gross income tax.
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55	55	CURRENT VERSION OF TEXT
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57	57	As introduced.
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61	61	An Act indexing for inflation the taxable income brackets under the New Jersey gross income tax, 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: 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 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: 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 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. The director shall annually recompute the taxable income bracket amounts and tax amount per taxable income bracket by multiplying each adjusted taxable income bracket amount by the cost-of-living adjustment, and recomputing the taxable income bracket amounts at the statutory tax rates with the recomputed bracket amounts. Notwithstanding the taxable income bracket amounts and tax amount per taxable income bracket provided in the tax tables in this section, each taxpayer shall use the adjusted taxable income bracket amounts and tax amount per taxable income bracket as computed by the director for the applicable taxable year. The director shall round the recomputed taxable income bracket amounts to the next highest multiple of $10. e. For the purposes of this section, "cost-of-living adjustment" means the factor calculated by dividing the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the calendar year preceding the calendar year in which P.L. , c. (pending before the Legislature as this bill) takes effect. (cf: P.L.2004, c.40, s.17) 2. This act shall take effect immediately and shall apply to taxable years beginning on and after January 1 next following the date of enactment. STATEMENT This bill indexes for inflation the taxable income brackets under the New Jersey gross income tax. This adds to the State personal income tax a common-sense taxpayer protection called inflation indexing that has been provided under the federal income tax since the 1980s. Inflation indexing means that tax brackets are revised annually to reflect nominal price and wage increases that result from inflation. When tax brackets are not indexed for inflation it results in what is called "bracket creep," which is an increase in effective tax rates caused by inflation. Higher income can bump a taxpayer into the next tax bracket, even if that higher income is merely keeping pace with inflation. A lack of inflation adjustment can also push more of a taxpayer's income into the highest bracket for which they qualify. The final result is a tax increase that occurs without any legislation being passed. Indexing addresses this by altering each bracket level each year by the level of annual inflation. Under this bill the inflation adjustment for taxable income brackets is the national consumer price index for all urban consumers as prepared by the United States Department of Labor. This is the same measure of inflation that is used for indexing the taxable income brackets under the federal Internal Revenue Code. The bill compares an annual inflation measure from the year prior to the one for which taxes will be imposed to a base year measure from the year prior to the one in which the bill is enacted. This delay allows the Director of the Division of Taxation to determine the adjusted amounts when the tax year begins.
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63	63	An Act indexing for inflation the taxable income brackets under the New Jersey gross income tax, amending N.J.S.54A:2-1.
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66	66
67	67	Be It Enacted by the Senate and General Assembly of the State of New Jersey:
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71	71	1. N.J.S.54A:2-1 is amended to read as follows:
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73	73	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:
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75	75	a. For married individuals filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes:
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77	77	(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
78	78
79	79
80	80
81	81	If the taxable income is: The tax is:
82	82
83	83
84	84
85	85	Not over $20,000.00.......... 2% of taxable income
86	86
87	87
88	88
89	89	Over $20,000.00 but not
90	90
91	91	over $50,000.00............. $400.00 plus 2.5% of the
92	92
93	93	excess over $20,000.00
94	94
95	95	Over $50,000.00 but not
96	96
97	97	over $70,000.00.............. $1,150.00 plus 3.5% of the
98	98
99	99	excess over $50,000.00
100	100
101	101
102	102
103	103	Over $70,000.00 but not
104	104
105	105	over $80,000.00.............. $1,850.00 plus 5.0% of the
106	106
107	107	excess over $70,000.00
108	108
109	109
110	110
111	111	Over $80,000.00 but not
112	112
113	113	over $150,000.00............. $2,350.00 plus 6.5% of the
114	114
115	115	excess over $80,000.00
116	116
117	117
118	118
119	119	Over $150,000.00............... $6,900.00 plus 7.0% of the
120	120
121	121	excess over $150,000.00
122	122
123	123
124	124
125	125	(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:
126	126
127	127	If the taxable income is: The tax is:
128	128
129	129
130	130
131	131	Not over $20,000.00.............. 1.900% of taxable income
132	132
133	133
134	134
135	135	Over $20,000.00 but not
136	136
137	137	over $50,000.00................ $380.00 plus 2.375% of the
138	138
139	139	excess over $20,000.00
140	140
141	141
142	142
143	143	Over $50,000.00 but not
144	144
145	145	over $70,000.00.............. $1,092.50 plus 3.325% of the
146	146
147	147	excess over $50,000.00
148	148
149	149
150	150
151	151	Over $70,000.00 but not
152	152
153	153	over $80,000.00.............. $1,757.50 plus 4.750% of the
154	154
155	155	excess over $70,000.00
156	156
157	157
158	158
159	159	Over $80,000.00 but not
160	160
161	161	over $150,000.00............. $2,232.50 plus 6.175% of the
162	162
163	163	excess over $80,000.00
164	164
165	165
166	166
167	167	Over $150,000.00 ............. $6,555.00 plus 6.650% of the
168	168
169	169	excess over $150,000.00
170	170
171	171
172	172
173	173	(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
174	174
175	175
176	176
177	177	If the taxable income is: The tax is:
178	178
179	179
180	180
181	181	Not over $20,000.00............. 1.700% of taxable income
182	182
183	183
184	184
185	185	Over $20,000.00 but not
186	186
187	187	over $50,000.00................ $340.00 plus 2.125% of the
188	188
189	189	excess over $20,000.00
190	190
191	191
192	192
193	193	Over $50,000.00 but not
194	194
195	195	over $70,000.00.............. $977.50 plus 2.975% of the
196	196
197	197	excess over $50,000.00
198	198
199	199
200	200
201	201	Over $70,000.00 but not
202	202
203	203	over $80,000.00.............. $1,572.50 plus 4.250% of the
204	204
205	205	excess over $70,000.00
206	206
207	207
208	208
209	209	Over $80,000.00 but not
210	210
211	211	over $150,000.00............. $1,997.50 plus 6.013% of the
212	212
213	213	excess over $80,000.00
214	214
215	215	Over $150,000.00 ............. $6,206.60 plus 6.580% of the
216	216
217	217	excess over $150,000.00
218	218
219	219	(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
220	220
221	221
222	222
223	223	If the taxable income is: The tax is:
224	224
225	225
226	226
227	227	Not over $20,000.00............ 1.400% of taxable income
228	228
229	229
230	230
231	231	Over $20,000.00 but not
232	232
233	233	over $50,000.00................ $280.00 plus 1.750% of the
234	234
235	235	excess over $20,000.00
236	236
237	237
238	238
239	239	Over $50,000.00 but not
240	240
241	241	over $70,000.00.............. $805.00 plus 2.450% of the
242	242
243	243	excess over $50,000.00
244	244
245	245
246	246
247	247	Over $70,000.00 but not
248	248
249	249	over $80,000.00.............. $1,295.50 plus 3.500% of the
250	250
251	251	excess over $70,000.00
252	252
253	253
254	254
255	255	Over $80,000.00 but not
256	256
257	257	over $150,000.00............. $1,645.00 plus 5.525% of the
258	258
259	259	excess over $80,000.00
260	260
261	261
262	262
263	263	Over $150,000.00 ............. $5,512.50 plus 6.370% of the
264	264
265	265	excess over $150,000.00
266	266
267	267
268	268
269	269	(5) for taxable years beginning on or after January 1, 2004:
270	270
271	271
272	272
273	273	If the taxable income is: The tax is:
274	274
275	275
276	276
277	277	Not over $20,000.00 ........... 1.400% of taxable income
278	278
279	279
280	280
281	281	Over $20,000.00 but not
282	282
283	283	over $50,000.00 ................ $280.00 plus 1.750% of the
284	284
285	285	excess over $20,000.00
286	286
287	287
288	288
289	289	Over $50,000.00 but not
290	290
291	291	over $70,000.00 ............. $805.00 plus 2.450% of the
292	292
293	293	excess over $50,000.00
294	294
295	295
296	296
297	297	Over $70,000.00 but not
298	298
299	299	over $80,000.00 ............. $1,295.50 plus 3.500% of the
300	300
301	301	excess over $70,000.00
302	302
303	303
304	304
305	305	Over $80,000.00 but not
306	306
307	307	over $150,000.00 ............ $1,645.00 plus 5.525% of the
308	308
309	309	excess over $80,000.00
310	310
311	311	Over $150,000.00 but not
312	312
313	313	over $500,000.00 ............ $5,512.50 plus 6.370% of the
314	314
315	315	excess over $150,000.00
316	316
317	317
318	318
319	319	Over $500,000.00 ............ $27,807.50 plus 8.970% of the
320	320
321	321	excess over $500,000.00
322	322
323	323
324	324
325	325	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:
326	326
327	327
328	328
329	329	(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
330	330
331	331
332	332
333	333	If the taxable income is: The tax is:
334	334
335	335
336	336
337	337	Not over $20,000.00............ 2% of taxable income
338	338
339	339
340	340
341	341	Over $20,000.00 but not
342	342
343	343	over $35,000.00................ $400.00 plus 2.5% of the
344	344
345	345	excess over $20,000.00
346	346
347	347
348	348
349	349	Over $35,000.00 but not
350	350
351	351	over $40,000.00................ $775.00 plus 5.0% of the
352	352
353	353	excess over $35,000.00
354	354
355	355
356	356
357	357	Over $40,000.00 but not
358	358
359	359	over $75,000.00.............. $1,025.00 plus 6.5% of the
360	360
361	361	excess over $40,000.00
362	362
363	363
364	364
365	365	Over $75,000.00................ $3,300.00 plus 7.0% of the
366	366
367	367	excess over $75,000.00
368	368
369	369
370	370
371	371	(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:
372	372
373	373
374	374
375	375	If the taxable income is: The tax is:
376	376
377	377
378	378
379	379	Not over $20,000.00...... 1.900% of taxable income
380	380
381	381
382	382
383	383	Over $20,000.00 but not
384	384
385	385	over $35,000.00......... $380.00 plus 2.375% of the
386	386
387	387	excess over $20,000.00
388	388
389	389
390	390
391	391	Over $35,000.00 but not
392	392
393	393	over $40,000.00................ $736.25 plus 4.750% of the
394	394
395	395	excess over $35,000.00
396	396
397	397	Over $40,000.00 but not
398	398
399	399	over $75,000.00.............. $973.75 plus 6.175% of the
400	400
401	401	excess over $40,000.00
402	402
403	403
404	404
405	405	Over $75,000.00............... $3,135.00 plus 6.650% of the
406	406
407	407	excess over $75,000.00
408	408
409	409
410	410
411	411	(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
412	412
413	413
414	414
415	415	If the taxable income is: The tax is:
416	416
417	417
418	418
419	419	Not over $20,000.00......... 1.700% of taxable income
420	420
421	421
422	422
423	423	Over $20,000.00 but not
424	424
425	425	over $35,000.00................ $340.00 plus 2.125% of the
426	426
427	427	excess over $20,000.00
428	428
429	429
430	430
431	431	Over $35,000.00 but not
432	432
433	433	over $40,000.00................ $658.75 plus 4.250% of the
434	434
435	435	excess over $35,000.00
436	436
437	437
438	438
439	439	Over $40,000.00 but not
440	440
441	441	over $75,000.00.............. $871.25 plus 6.013% of the
442	442
443	443	excess over $40,000.00
444	444
445	445
446	446
447	447	Over $75,000.00............... $2,975.80 plus 6.580% of the
448	448
449	449	excess over $75,000.00
450	450
451	451
452	452
453	453	(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
454	454
455	455
456	456
457	457	If the taxable income is: The tax is:
458	458
459	459
460	460
461	461	Not over $20,000.00............ 1.400% of taxable income
462	462
463	463
464	464
465	465	Over $20,000.00 but not
466	466
467	467	over $35,000.00................ $280.00 plus 1.750% of the
468	468
469	469	excess over $20,000.00
470	470
471	471
472	472
473	473	Over $35,000.00 but not
474	474
475	475	over $40,000.00................ $542.50 plus 3.500% of the
476	476
477	477	excess over $35,000.00
478	478
479	479
480	480
481	481	Over $40,000.00 but not
482	482
483	483	over $75,000.00.............. $717.50 plus 5.525% of the
484	484
485	485	excess over $40,000.00
486	486
487	487	Over $75,000.00............... $2,651.25 plus 6.370% of the
488	488
489	489	excess over $75,000.00
490	490
491	491
492	492
493	493	(5) for taxable years beginning on or after January 1, 2004:
494	494
495	495
496	496
497	497	If the taxable income is: The tax is:
498	498
499	499
500	500
501	501	Not over $20,000.00 ............ 1.400% of taxable income
502	502
503	503
504	504
505	505	Over $20,000.00 but not
506	506
507	507	over $35,000.00 ............... $280.00 plus 1.750% of the
508	508
509	509	excess over $20,000.00
510	510
511	511
512	512
513	513	Over $35,000.00 but not
514	514
515	515	over $40,000.00 ............... $542.50 plus 3.500% of the
516	516
517	517	excess over $35,000.00
518	518
519	519
520	520
521	521	Over $40,000.00 but not
522	522
523	523	over $75,000.00 ............. $717.50 plus 5.525% of the
524	524
525	525	excess over $40,000.00
526	526
527	527
528	528
529	529	Over $75,000.00 but not
530	530
531	531	over $500,000.00 ............. $2,651.25 plus 6.370% of the
532	532
533	533	excess over $75,000.00
534	534
535	535
536	536
537	537	Over $500,000.00 ............... $29,723.75 plus 8.970% of the
538	538
539	539	excess over $500,000.00
540	540
541	541
542	542
543	543	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.
544	544
545	545	d. The director shall annually recompute the taxable income bracket amounts and tax amount per taxable income bracket by multiplying each adjusted taxable income bracket amount by the cost-of-living adjustment, and recomputing the taxable income bracket amounts at the statutory tax rates with the recomputed bracket amounts. Notwithstanding the taxable income bracket amounts and tax amount per taxable income bracket provided in the tax tables in this section, each taxpayer shall use the adjusted taxable income bracket amounts and tax amount per taxable income bracket as computed by the director for the applicable taxable year. The director shall round the recomputed taxable income bracket amounts to the next highest multiple of $10.
546	546
547	547	e. For the purposes of this section, "cost-of-living adjustment" means the factor calculated by dividing the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the calendar year preceding the calendar year in which P.L. , c. (pending before the Legislature as this bill) takes effect.
548	548
549	549	(cf: P.L.2004, c.40, s.17)
550	550
551	551
552	552
553	553	2. This act shall take effect immediately and shall apply to taxable years beginning on and after January 1 next following the date of enactment.
554	554
555	555
556	556
557	557
558	558
559	559	STATEMENT
560	560
561	561
562	562
563	563	This bill indexes for inflation the taxable income brackets under the New Jersey gross income tax. This adds to the State personal income tax a common-sense taxpayer protection called inflation indexing that has been provided under the federal income tax since the 1980s. Inflation indexing means that tax brackets are revised annually to reflect nominal price and wage increases that result from inflation. When tax brackets are not indexed for inflation it results in what is called "bracket creep," which is an increase in effective tax rates caused by inflation. Higher income can bump a taxpayer into the next tax bracket, even if that higher income is merely keeping pace with inflation. A lack of inflation adjustment can also push more of a taxpayer's income into the highest bracket for which they qualify. The final result is a tax increase that occurs without any legislation being passed. Indexing addresses this by altering each bracket level each year by the level of annual inflation.
564	564
565	565	Under this bill the inflation adjustment for taxable income brackets is the national consumer price index for all urban consumers as prepared by the United States Department of Labor. This is the same measure of inflation that is used for indexing the taxable income brackets under the federal Internal Revenue Code. The bill compares an annual inflation measure from the year prior to the one for which taxes will be imposed to a base year measure from the year prior to the one in which the bill is enacted. This delay allows the Director of the Division of Taxation to determine the adjusted amounts when the tax year begins.