New Jersey 2024-2025 Regular Session

New Jersey Senate Bill S792 Compare Versions

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

Old	New	Differences
1	1	SENATE, No. 792 STATE OF NEW JERSEY 221st LEGISLATURE PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
2	2
3	3	SENATE, No. 792
4	4
5	5
6	6
7	7	STATE OF NEW JERSEY
8	8
9	9	221st LEGISLATURE
10	10
11	11
12	12
13	13	PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
14	14
15	15
16	16
17	17	Sponsored by: Senator ANTHONY M. BUCCO District 25 (Morris and Passaic) Co-Sponsored by: Senators Sarlo, Holzapfel, Testa and Singleton SYNOPSIS Indexes for inflation taxable income brackets under New Jersey gross income tax. CURRENT VERSION OF TEXT Introduced Pending Technical Review by Legislative Counsel.
18	18
19	19
20	20
21	21	Sponsored by:
22	22
23	23	Senator ANTHONY M. BUCCO
24	24
25	25	District 25 (Morris and Passaic)
26	26
27	27
28	28
29	29	Co-Sponsored by:
30	30
31	31	Senators Sarlo, Holzapfel, Testa and Singleton
32	32
33	33
34	34
35	35
36	36
37	37
38	38
39	39
40	40
41	41	SYNOPSIS
42	42
43	43	Indexes for inflation taxable income brackets under New Jersey gross income tax.
44	44
45	45
46	46
47	47	CURRENT VERSION OF TEXT
48	48
49	49	Introduced Pending Technical Review by Legislative Counsel.
50	50
51	51
52	52
53	53	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.
54	54
55	55	An Act indexing for inflation the taxable income brackets under the New Jersey gross income tax, amending N.J.S.54A:2-1.
56	56
57	57
58	58
59	59	Be It Enacted by the Senate and General Assembly of the State of New Jersey:
60	60
61	61
62	62
63	63	1. N.J.S.54A:2-1 is amended to read as follows:
64	64
65	65	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:
66	66
67	67	a. For married individuals filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes:
68	68
69	69	(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
70	70
71	71
72	72
73	73	If the taxable income is: The tax is:
74	74
75	75
76	76
77	77	Not over $20,000.00.......... 2% of taxable income
78	78
79	79
80	80
81	81	Over $20,000.00 but not
82	82
83	83	over $50,000.00............. $400.00 plus 2.5% of the
84	84
85	85	excess over $20,000.00
86	86
87	87	Over $50,000.00 but not
88	88
89	89	over $70,000.00.............. $1,150.00 plus 3.5% of the
90	90
91	91	excess over $50,000.00
92	92
93	93
94	94
95	95	Over $70,000.00 but not
96	96
97	97	over $80,000.00.............. $1,850.00 plus 5.0% of the
98	98
99	99	excess over $70,000.00
100	100
101	101
102	102
103	103	Over $80,000.00 but not
104	104
105	105	over $150,000.00............. $2,350.00 plus 6.5% of the
106	106
107	107	excess over $80,000.00
108	108
109	109
110	110
111	111	Over $150,000.00............... $6,900.00 plus 7.0% of the
112	112
113	113	excess over $150,000.00
114	114
115	115
116	116
117	117	(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:
118	118
119	119
120	120
121	121	If the taxable income is: The tax is:
122	122
123	123
124	124
125	125	Not over $20,000.00.............. 1.900% of taxable income
126	126
127	127
128	128
129	129	Over $20,000.00 but not
130	130
131	131	over $50,000.00................ $380.00 plus 2.375% of the
132	132
133	133	excess over $20,000.00
134	134
135	135
136	136
137	137	Over $50,000.00 but not
138	138
139	139	over $70,000.00.............. $1,092.50 plus 3.325% of the
140	140
141	141	excess over $50,000.00
142	142
143	143
144	144
145	145	Over $70,000.00 but not
146	146
147	147	over $80,000.00.............. $1,757.50 plus 4.750% of the
148	148
149	149	excess over $70,000.00
150	150
151	151
152	152
153	153	Over $80,000.00 but not
154	154
155	155	over $150,000.00............. $2,232.50 plus 6.175% of the
156	156
157	157	excess over $80,000.00
158	158
159	159
160	160
161	161	Over $150,000.00 ............. $6,555.00 plus 6.650% of the
162	162
163	163	excess over $150,000.00
164	164
165	165
166	166
167	167	(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
168	168
169	169
170	170
171	171	If the taxable income is: The tax is:
172	172
173	173
174	174
175	175	Not over $20,000.00............. 1.700% of taxable income
176	176
177	177
178	178
179	179	Over $20,000.00 but not
180	180
181	181	over $50,000.00................ $340.00 plus 2.125% of the
182	182
183	183	excess over $20,000.00
184	184
185	185
186	186
187	187	Over $50,000.00 but not
188	188
189	189	over $70,000.00.............. $977.50 plus 2.975% of the
190	190
191	191	excess over $50,000.00
192	192
193	193
194	194
195	195	Over $70,000.00 but not
196	196
197	197	over $80,000.00.............. $1,572.50 plus 4.250% of the
198	198
199	199	excess over $70,000.00
200	200
201	201
202	202
203	203	Over $80,000.00 but not
204	204
205	205	over $150,000.00............. $1,997.50 plus 6.013% of the
206	206
207	207	excess over $80,000.00
208	208
209	209	Over $150,000.00 ............. $6,206.60 plus 6.580% of the
210	210
211	211	excess over $150,000.00
212	212
213	213
214	214
215	215	(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
216	216
217	217
218	218
219	219	If the taxable income is: The tax is:
220	220
221	221
222	222
223	223	Not over $20,000.00............ 1.400% of taxable income
224	224
225	225
226	226
227	227	Over $20,000.00 but not
228	228
229	229	over $50,000.00................ $280.00 plus 1.750% of the
230	230
231	231	excess over $20,000.00
232	232
233	233
234	234
235	235	Over $50,000.00 but not
236	236
237	237	over $70,000.00.............. $805.00 plus 2.450% of the
238	238
239	239	excess over $50,000.00
240	240
241	241
242	242
243	243	Over $70,000.00 but not
244	244
245	245	over $80,000.00.............. $1,295.50 plus 3.500% of the
246	246
247	247	excess over $70,000.00
248	248
249	249
250	250
251	251	Over $80,000.00 but not
252	252
253	253	over $150,000.00............. $1,645.00 plus 5.525% of the
254	254
255	255	excess over $80,000.00
256	256
257	257
258	258
259	259	Over $150,000.00 ............. $5,512.50 plus 6.370% of the
260	260
261	261	excess over $150,000.00
262	262
263	263
264	264
265	265	(5) for taxable years beginning on or after January 1, 2004:
266	266
267	267
268	268
269	269	If the taxable income is: The tax is:
270	270
271	271
272	272
273	273	Not over $20,000.00 ........... 1.400% of taxable income
274	274
275	275
276	276
277	277	Over $20,000.00 but not
278	278
279	279	over $50,000.00 ................ $280.00 plus 1.750% of the
280	280
281	281	excess over $20,000.00
282	282
283	283
284	284
285	285	Over $50,000.00 but not
286	286
287	287	over $70,000.00 ............. $805.00 plus 2.450% of the
288	288
289	289	excess over $50,000.00
290	290
291	291
292	292
293	293	Over $70,000.00 but not
294	294
295	295	over $80,000.00 ............. $1,295.50 plus 3.500% of the
296	296
297	297	excess over $70,000.00
298	298
299	299
300	300
301	301	Over $80,000.00 but not
302	302
303	303	over $150,000.00 ............ $1,645.00 plus 5.525% of the
304	304
305	305	excess over $80,000.00
306	306
307	307	Over $150,000.00 but not
308	308
309	309	over $500,000.00 ............ $5,512.50 plus 6.370% of the
310	310
311	311	excess over $150,000.00
312	312
313	313
314	314
315	315	Over $500,000.00 ............ $27,807.50 plus 8.970% of the
316	316
317	317	excess over $500,000.00
318	318
319	319
320	320
321	321	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:
322	322
323	323
324	324
325	325	(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:
326	326
327	327
328	328
329	329	If the taxable income is: The tax is:
330	330
331	331
332	332
333	333	Not over $20,000.00............ 2% of taxable income
334	334
335	335
336	336
337	337	Over $20,000.00 but not
338	338
339	339	over $35,000.00................ $400.00 plus 2.5% of the
340	340
341	341	excess over $20,000.00
342	342
343	343
344	344
345	345	Over $35,000.00 but not
346	346
347	347	over $40,000.00................ $775.00 plus 5.0% of the
348	348
349	349	excess over $35,000.00
350	350
351	351
352	352
353	353	Over $40,000.00 but not
354	354
355	355	over $75,000.00.............. $1,025.00 plus 6.5% of the
356	356
357	357	excess over $40,000.00
358	358
359	359
360	360
361	361	Over $75,000.00................ $3,300.00 plus 7.0% of the
362	362
363	363	excess over $75,000.00
364	364
365	365
366	366
367	367	(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:
368	368
369	369
370	370
371	371	If the taxable income is: The tax is:
372	372
373	373
374	374
375	375	Not over $20,000.00...... 1.900% of taxable income
376	376
377	377
378	378
379	379	Over $20,000.00 but not
380	380
381	381	over $35,000.00......... $380.00 plus 2.375% of the
382	382
383	383	excess over $20,000.00
384	384
385	385
386	386
387	387	Over $35,000.00 but not
388	388
389	389	over $40,000.00................ $736.25 plus 4.750% of the
390	390
391	391	excess over $35,000.00
392	392
393	393	Over $40,000.00 but not
394	394
395	395	over $75,000.00.............. $973.75 plus 6.175% of the
396	396
397	397	excess over $40,000.00
398	398
399	399
400	400
401	401	Over $75,000.00............... $3,135.00 plus 6.650% of the
402	402
403	403	excess over $75,000.00
404	404
405	405
406	406
407	407	(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:
408	408
409	409
410	410
411	411	If the taxable income is: The tax is:
412	412
413	413
414	414
415	415	Not over $20,000.00......... 1.700% of taxable income
416	416
417	417
418	418
419	419	Over $20,000.00 but not
420	420
421	421	over $35,000.00................ $340.00 plus 2.125% of the
422	422
423	423	excess over $20,000.00
424	424
425	425
426	426
427	427	Over $35,000.00 but not
428	428
429	429	over $40,000.00................ $658.75 plus 4.250% of the
430	430
431	431	excess over $35,000.00
432	432
433	433
434	434
435	435	Over $40,000.00 but not
436	436
437	437	over $75,000.00.............. $871.25 plus 6.013% of the
438	438
439	439	excess over $40,000.00
440	440
441	441
442	442
443	443	Over $75,000.00............... $2,975.80 plus 6.580% of the
444	444
445	445	excess over $75,000.00
446	446
447	447
448	448
449	449	(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:
450	450
451	451
452	452
453	453	If the taxable income is: The tax is:
454	454
455	455
456	456
457	457	Not over $20,000.00............ 1.400% of taxable income
458	458
459	459
460	460
461	461	Over $20,000.00 but not
462	462
463	463	over $35,000.00................ $280.00 plus 1.750% of the
464	464
465	465	excess over $20,000.00
466	466
467	467
468	468
469	469	Over $35,000.00 but not
470	470
471	471	over $40,000.00................ $542.50 plus 3.500% of the
472	472
473	473	excess over $35,000.00
474	474
475	475
476	476
477	477	Over $40,000.00 but not
478	478
479	479	over $75,000.00.............. $717.50 plus 5.525% of the
480	480
481	481	excess over $40,000.00
482	482
483	483
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.