Winners and Losers with Tax/Economic Reforms I Propose


Winners:

a) Anybody who works for less than $15/hr with benefits or $18/hr without benefits. Their gains are dampened somewhat by the fact that state income tax will be higher. On the other hand, they will have no sales tax and if they are homeowners they will have no property tax. If  they are renters, a payroll credit softens the impact of the higher income tax.

b) Anybody who works for a pay rate or salary above those described in (a) because the minimum wage increase will place an upward pressure on all wages. Inflation of consumer goods is checked by neighboring states as consumers would flock to PA and NY if NJ merchants increased their prices significantly.

c) Homeowners who are New Jersey taxpayers. They will only face the general income tax which is proportional to income. Seniors in particular are among the principal beneficiaries. In cases where a NJ resident works outside New Jersey and does not pay NJ income tax, a prorated portion of the property tax remains in effect.

d) All corporations, regardless of type and size, and professional employers who have employees in the State of New Jersey will not only enjoy zero tax on their earnings but they will pay no property taxes in their sites. Some rural areas of the state may be excluded from this policy as a conservation barrier. Same applies to limited partnerships and limited liability companies (which could be C or S corporations as well.)

e) Farmers and landowners. Absence  of property tax will ease the burden of holding on to large tracks of land.

f) Merchants of all types. Lack of a sales tax and higher wages should increase demand, drawing consumers even from outside New Jersey if New Jersey merchants maintain level prices.

g) Investors, regardless of income, who invest in New Jersey or in corporations which operate in New Jersey would see zero tax rate on their dividend and capital gains. Dividend and capital gains from New Jersey receive “Most Favored Nation” treatment.

About Even

h) People who rent. Generally speaking, the reforms are inclined to stimulate home-ownership. Income tax increase is almost balanced out by automatic payroll deduction (which is paid by rental property taxes) and elimination of sales tax.

i) Owners of residential rental property. Until we design a better method, property taxes will continue to be in effect.

Losers:

j) Investors whose dividend and capital gains are earned in operations not present in New Jersey. By far the biggest losers here although retirement accounts are exempt and there is a threshold (to be determined) below which such dividend is treated as regular income.

k) Land/homeowners who are not New Jersey residents and taxpayers. Their property tax rates are very likely to increase.

l) Career politicians. There will be many less public positions available for them once they get out of political office.

Note that there may be exist niches not included in the compilation above. For instance, some workers of current local boards of education could be displaced as result of consolidation although the number could be much smaller than expected. Another example is commercial rental property: If it is occupied, there will be no property taxes on it but if it is vacant, property taxes will apply.

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