New Jersey 2024-2025 Regular Session

New Jersey Assembly Bill A977 Compare Versions

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

Old	New	Differences
1	1	ASSEMBLY, No. 977 STATE OF NEW JERSEY 221st LEGISLATURE PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
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3	3	ASSEMBLY, No. 977
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7	7	STATE OF NEW JERSEY
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9	9	221st LEGISLATURE
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13	13	PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
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17	17	Sponsored by: Assemblywoman NANCY F. MUNOZ District 21 (Middlesex, Morris, Somerset and Union) Assemblyman JOHN DIMAIO District 23 (Hunterdon, Somerset and Warren) Co-Sponsored by: Assemblywoman Dunn, Assemblymen McGuckin, S.Kean, Clifton, Peterson, McClellan, Assemblywoman Matsikoudis, Assemblymen Guardian, Torrissi, Assemblywoman Swift, Assemblymen Webber, Scharfenberger, Assemblywoman Flynn, Assemblymen Rumpf, DePhillips, Barranco and Sauickie SYNOPSIS Indexes for inflation taxable income brackets under New Jersey gross income tax. CURRENT VERSION OF TEXT Introduced Pending Technical Review by Legislative Counsel.
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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 (Middlesex, 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
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33	33	Co-Sponsored by:
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35	35	Assemblywoman Dunn, Assemblymen McGuckin, S.Kean, Clifton, Peterson, McClellan, Assemblywoman Matsikoudis, Assemblymen Guardian, Torrissi, Assemblywoman Swift, Assemblymen Webber, Scharfenberger, Assemblywoman Flynn, Assemblymen Rumpf, DePhillips, Barranco and Sauickie
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45	45	SYNOPSIS
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47	47	Indexes for inflation taxable income brackets under New Jersey gross income tax.
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51	51	CURRENT VERSION OF TEXT
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53	53	Introduced Pending Technical Review by Legislative Counsel.
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57	57	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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59	59	An Act indexing for inflation the taxable income brackets under the New Jersey gross income tax, amending N.J.S.54A:2-1.
60	60
61	61
62	62
63	63	Be It Enacted by the Senate and General Assembly of the State of New Jersey:
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67	67	1. N.J.S.54A:2-1 is amended to read as follows:
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69	69	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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71	71	a. For married individuals filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes:
72	72
73	73	(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
74	74
75	75
76	76
77	77	If the taxable income is: The tax is:
78	78
79	79
80	80
81	81	Not over $20,000.00.......... 2% of taxable income
82	82
83	83
84	84
85	85	Over $20,000.00 but not
86	86
87	87	over $50,000.00............. $400.00 plus 2.5% of the
88	88
89	89	excess over $20,000.00
90	90
91	91	Over $50,000.00 but not
92	92
93	93	over $70,000.00.............. $1,150.00 plus 3.5% of the
94	94
95	95	excess over $50,000.00
96	96
97	97
98	98
99	99	Over $70,000.00 but not
100	100
101	101	over $80,000.00.............. $1,850.00 plus 5.0% of the
102	102
103	103	excess over $70,000.00
104	104
105	105
106	106
107	107	Over $80,000.00 but not
108	108
109	109	over $150,000.00............. $2,350.00 plus 6.5% of the
110	110
111	111	excess over $80,000.00
112	112
113	113
114	114
115	115	Over $150,000.00............... $6,900.00 plus 7.0% of the
116	116
117	117	excess over $150,000.00
118	118
119	119
120	120
121	121	(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:
122	122
123	123	If the taxable income is: The tax is:
124	124
125	125
126	126
127	127	Not over $20,000.00.............. 1.900% of taxable income
128	128
129	129
130	130
131	131	Over $20,000.00 but not
132	132
133	133	over $50,000.00................ $380.00 plus 2.375% of the
134	134
135	135	excess over $20,000.00
136	136
137	137
138	138
139	139	Over $50,000.00 but not
140	140
141	141	over $70,000.00.............. $1,092.50 plus 3.325% of the
142	142
143	143	excess over $50,000.00
144	144
145	145
146	146
147	147	Over $70,000.00 but not
148	148
149	149	over $80,000.00.............. $1,757.50 plus 4.750% of the
150	150
151	151	excess over $70,000.00
152	152
153	153
154	154
155	155	Over $80,000.00 but not
156	156
157	157	over $150,000.00............. $2,232.50 plus 6.175% of the
158	158
159	159	excess over $80,000.00
160	160
161	161
162	162
163	163	Over $150,000.00 ............. $6,555.00 plus 6.650% of the
164	164
165	165	excess over $150,000.00
166	166
167	167
168	168
169	169	(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
170	170
171	171
172	172
173	173	If the taxable income is: The tax is:
174	174
175	175
176	176
177	177	Not over $20,000.00............. 1.700% of taxable income
178	178
179	179
180	180
181	181	Over $20,000.00 but not
182	182
183	183	over $50,000.00................ $340.00 plus 2.125% of the
184	184
185	185	excess over $20,000.00
186	186
187	187
188	188
189	189	Over $50,000.00 but not
190	190
191	191	over $70,000.00.............. $977.50 plus 2.975% of the
192	192
193	193	excess over $50,000.00
194	194
195	195
196	196
197	197	Over $70,000.00 but not
198	198
199	199	over $80,000.00.............. $1,572.50 plus 4.250% of the
200	200
201	201	excess over $70,000.00
202	202
203	203
204	204
205	205	Over $80,000.00 but not
206	206
207	207	over $150,000.00............. $1,997.50 plus 6.013% of the
208	208
209	209	excess over $80,000.00
210	210
211	211
212	212
213	213	Over $150,000.00 ............. $6,206.60 plus 6.580% of the
214	214
215	215	excess over $150,000.00
216	216
217	217	(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
218	218
219	219
220	220
221	221	If the taxable income is: The tax is:
222	222
223	223
224	224
225	225	Not over $20,000.00............ 1.400% of taxable income
226	226
227	227
228	228
229	229	Over $20,000.00 but not
230	230
231	231	over $50,000.00................ $280.00 plus 1.750% of the
232	232
233	233	excess over $20,000.00
234	234
235	235
236	236
237	237	Over $50,000.00 but not
238	238
239	239	over $70,000.00.............. $805.00 plus 2.450% of the
240	240
241	241	excess over $50,000.00
242	242
243	243
244	244
245	245	Over $70,000.00 but not
246	246
247	247	over $80,000.00.............. $1,295.50 plus 3.500% of the
248	248
249	249	excess over $70,000.00
250	250
251	251
252	252
253	253	Over $80,000.00 but not
254	254
255	255	over $150,000.00............. $1,645.00 plus 5.525% of the
256	256
257	257	excess over $80,000.00
258	258
259	259
260	260
261	261	Over $150,000.00 ............. $5,512.50 plus 6.370% of the
262	262
263	263	excess over $150,000.00
264	264
265	265
266	266
267	267	(5) for taxable years beginning on or after January 1, 2004:
268	268
269	269
270	270
271	271	If the taxable income is: The tax is:
272	272
273	273
274	274
275	275	Not over $20,000.00 ........... 1.400% of taxable income
276	276
277	277
278	278
279	279	Over $20,000.00 but not
280	280
281	281	over $50,000.00 ................ $280.00 plus 1.750% of the
282	282
283	283	excess over $20,000.00
284	284
285	285
286	286
287	287	Over $50,000.00 but not
288	288
289	289	over $70,000.00 ............. $805.00 plus 2.450% of the
290	290
291	291	excess over $50,000.00
292	292
293	293
294	294
295	295	Over $70,000.00 but not
296	296
297	297	over $80,000.00 ............. $1,295.50 plus 3.500% of the
298	298
299	299	excess over $70,000.00
300	300
301	301
302	302
303	303	Over $80,000.00 but not
304	304
305	305	over $150,000.00 ............ $1,645.00 plus 5.525% of the
306	306
307	307	excess over $80,000.00
308	308
309	309	Over $150,000.00 but not
310	310
311	311	over $500,000.00 ............ $5,512.50 plus 6.370% of the
312	312
313	313	excess over $150,000.00
314	314
315	315
316	316
317	317	Over $500,000.00 ............ $27,807.50 plus 8.970% of the
318	318
319	319	excess over $500,000.00
320	320
321	321
322	322
323	323	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:
324	324
325	325
326	326
327	327	(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
328	328
329	329
330	330
331	331	If the taxable income is: The tax is:
332	332
333	333
334	334
335	335	Not over $20,000.00............ 2% of taxable income
336	336
337	337
338	338
339	339	Over $20,000.00 but not
340	340
341	341	over $35,000.00................ $400.00 plus 2.5% of the
342	342
343	343	excess over $20,000.00
344	344
345	345
346	346
347	347	Over $35,000.00 but not
348	348
349	349	over $40,000.00................ $775.00 plus 5.0% of the
350	350
351	351	excess over $35,000.00
352	352
353	353
354	354
355	355	Over $40,000.00 but not
356	356
357	357	over $75,000.00.............. $1,025.00 plus 6.5% of the
358	358
359	359	excess over $40,000.00
360	360
361	361
362	362
363	363	Over $75,000.00................ $3,300.00 plus 7.0% of the
364	364
365	365	excess over $75,000.00
366	366
367	367
368	368
369	369	(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:
370	370
371	371
372	372
373	373	If the taxable income is: The tax is:
374	374
375	375
376	376
377	377	Not over $20,000.00...... 1.900% of taxable income
378	378
379	379
380	380
381	381	Over $20,000.00 but not
382	382
383	383	over $35,000.00......... $380.00 plus 2.375% of the
384	384
385	385	excess over $20,000.00
386	386
387	387
388	388
389	389	Over $35,000.00 but not
390	390
391	391	over $40,000.00................ $736.25 plus 4.750% of the
392	392
393	393	excess over $35,000.00
394	394
395	395	Over $40,000.00 but not
396	396
397	397	over $75,000.00.............. $973.75 plus 6.175% of the
398	398
399	399	excess over $40,000.00
400	400
401	401
402	402
403	403	Over $75,000.00............... $3,135.00 plus 6.650% of the
404	404
405	405	excess over $75,000.00
406	406
407	407
408	408
409	409	(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
410	410
411	411
412	412
413	413	If the taxable income is: The tax is:
414	414
415	415
416	416
417	417	Not over $20,000.00......... 1.700% of taxable income
418	418
419	419
420	420
421	421	Over $20,000.00 but not
422	422
423	423	over $35,000.00................ $340.00 plus 2.125% of the
424	424
425	425	excess over $20,000.00
426	426
427	427
428	428
429	429	Over $35,000.00 but not
430	430
431	431	over $40,000.00................ $658.75 plus 4.250% of the
432	432
433	433	excess over $35,000.00
434	434
435	435
436	436
437	437	Over $40,000.00 but not
438	438
439	439	over $75,000.00.............. $871.25 plus 6.013% of the
440	440
441	441	excess over $40,000.00
442	442
443	443
444	444
445	445	Over $75,000.00............... $2,975.80 plus 6.580% of the
446	446
447	447	excess over $75,000.00
448	448
449	449
450	450
451	451	(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
452	452
453	453
454	454
455	455	If the taxable income is: The tax is:
456	456
457	457
458	458
459	459	Not over $20,000.00............ 1.400% of taxable income
460	460
461	461
462	462
463	463	Over $20,000.00 but not
464	464
465	465	over $35,000.00................ $280.00 plus 1.750% of the
466	466
467	467	excess over $20,000.00
468	468
469	469
470	470
471	471	Over $35,000.00 but not
472	472
473	473	over $40,000.00................ $542.50 plus 3.500% of the
474	474
475	475	excess over $35,000.00
476	476
477	477
478	478
479	479	Over $40,000.00 but not
480	480
481	481	over $75,000.00.............. $717.50 plus 5.525% of the
482	482
483	483	excess over $40,000.00
484	484
485	485	Over $75,000.00............... $2,651.25 plus 6.370% of the
486	486
487	487	excess over $75,000.00
488	488
489	489
490	490
491	491	(5) for taxable years beginning on or after January 1, 2004:
492	492
493	493
494	494
495	495	If the taxable income is: The tax is:
496	496
497	497
498	498
499	499	Not over $20,000.00 ............ 1.400% of taxable income
500	500
501	501
502	502
503	503	Over $20,000.00 but not
504	504
505	505	over $35,000.00 ............... $280.00 plus 1.750% of the
506	506
507	507	excess over $20,000.00
508	508
509	509
510	510
511	511	Over $35,000.00 but not
512	512
513	513	over $40,000.00 ............... $542.50 plus 3.500% of the
514	514
515	515	excess over $35,000.00
516	516
517	517
518	518
519	519	Over $40,000.00 but not
520	520
521	521	over $75,000.00 ............. $717.50 plus 5.525% of the
522	522
523	523	excess over $40,000.00
524	524
525	525
526	526
527	527	Over $75,000.00 but not
528	528
529	529	over $500,000.00 ............. $2,651.25 plus 6.370% of the
530	530
531	531	excess over $75,000.00
532	532
533	533
534	534
535	535	Over $500,000.00 ............... $29,723.75 plus 8.970% of the
536	536
537	537	excess over $500,000.00
538	538
539	539
540	540
541	541	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.
542	542
543	543	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.
544	544
545	545	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.
546	546
547	547	(cf: P.L.2004, c.40, s.17)
548	548
549	549
550	550
551	551	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.
552	552
553	553
554	554
555	555
556	556
557	557	STATEMENT
558	558
559	559
560	560
561	561	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.
562	562
563	563	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.