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Was It Worth It? Looking Back on a Decade of Income Tax Cuts

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M Jones

I could spend all day here on these articles pointing out misleading arguments and outright distortions.

Let's start with this one.

"New Jerseyans today are paying a lower state income tax than they would have in 1993 on the same income."

This is false. The same nominal income of 1993 isn't that same as the income of 2005. Because the NJ state tax brackets are not indexed for inflation, over time your taxes paid go up because your inflated income moves you up brackets.

I will use the estimate that inflation has average 3% per year since 1991. This means that inflation would require a worker who earned 100K in 1991 to earn 150K in 2005 to maintain the same income level.

Using the tables in the article, the tax on 100K in 1991 would have been $3,650. The tax on 150K today is $5,512. As a percentage of income, these taxes are about the same, meaning in real terms he got no tax cut.

Not that this takes into account all the tax cuts! If the tax rates simply stayed the same, the taxes would have gone up sharply due to inflation alone.

But this is not enough. Not only do the people of NJPP want a larger slice of income by inflation, they also want a larger slice in real terms.

If the tax cuts were not put in place, the total tax in real terms would have been almost 50% more from 1991 to 2005.

My question to NJPP is: Why didn't you fairly represent what taxes people actually pay?

[8/23/2005 4:21 PM]
 
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