Indexes for inflation various thresholds and qualifications under New Jersey gross income tax.
The adjustments will begin with the 2022 tax year and will rely on the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). For instance, the current minimum taxable income threshold for single filers is set at $10,000 and $20,000 for joint filers, which will be regularly increased to reflect changes in the cost of living. Similarly, income limitations for deductions related to the New Jersey College Affordability Act and relief for wounded warriors will also be indexed, thereby expanding access to these tax benefits for more residents over time.
Assembly Bill A2989 aims to index various thresholds and qualifications under the New Jersey gross income tax to inflation. The bill proposes annual adjustments to the minimum taxable income thresholds that trigger gross income tax liabilities as well as the qualifications for various tax deductions and credits. These adjustments would help ensure that these thresholds keep pace with inflation, thereby aiding taxpayers who might otherwise fall into a higher tax bracket due to inflationary increases in their incomes rather than real income growth.
While the bill is largely seen as a necessary update to the tax code, it may spark discussions among legislators regarding its potential fiscal impact as it could influence state revenue collections. Proponents argue that ensuring tax thresholds remain relevant is essential for fairness in taxation, while opponents might caution against potential revenue loss that could arise from such adjustments if not properly accounted for in budget planning. As inflation can vary, the predictability of revenue may become a point of contention during legislative discussions.