An interesting report. I'd just like to quickly correct a minor error in the tables comparing income taxes in nearby states. In Maryland, Baltimore City is a county-level government; therefore, residents of the city only pay 3.05% in local income tax. Baltimore County residents pay 2.83%. In its wisdom, the state caps the local income tax rate at a maxiumum level of 3.2%.

http://njtoday.net/2010/02/08/departing-wealth-hurts-nj-charities/

Oops- looks like wealthy are leaving the Garden State. Oh well. Guess the basic assumption of this paper that wealthy like to stick around to pay for union hacks is wrong.

After reading your report, I came to the conclusion that there are few taxes (to non-unionized labor) you don't like.

A case in point is your comment that wages dedicated to 401k contribution should be taxed because other types of retirement savings plans don't enjoy the same treatment.

So then, why not tax union worker pension contributions? Aren't these workers also getting special treatment in the NJ state tax code?

Of course, we don't want to do that. In addition to raising revenue, tax laws are used to encourage behaviors, like saving for retirement.

Why on earth then, would you advocate a change in tax policy that discourages retirement savings -- except for people (unionized state workers mainly) who receive pension contribution. Why not argue for an expansion of this tax shelter to other forms of retirement savings accounts?

In the case of 401K contributions, these are also fairly progressive since they are capped which keeps the tax saving more targeted to middle income households.

Your claim that people will still have an incentive save because of federal tax breaks ignores a basic economic fact - every dollar taken by government means one less dollar for people to save or spend.

Incomes are limited even if government spending is not.

Your recommendations include "Local governments in New Jersey should not be given the authority to levy income taxes." I experience one aspect of such a tax in working in Pennsylvania. Why I pay no Pennsylvania income tax, I pay a 1% income tax to the municipality. As this is a credit against my NJ income tax, NJ looses this revenue. A local municpal tax would subject PA, NY, and Delaware residents who work in NJ to such a tax. Think of the revenue to local municalities that can be used to offset their property tax burden. If such a municipal tax could be a credit against a NJ residents NJ income tax, the only people adversely effected would be the out of state commuters.

NJPP fails to realize the money individuals earn is not your money. I'm sure those who pay 8.97% worked hard for their money and feel that any increase is too much. The rich will just move out of state like they are doing in CA. Now CA has a 14 billion deficit and 7 billion is due to the rich moving.

NJ is approaching a negative marginal rate for those making $120k or up. This is a symptom of insane levels of spending - often for the middle class. The report simply assumes that spending will grow and at a minimum will be sustained. Where are the commensurate efforts directed at analyzing and cutting spending?

The report pushes progressivity -- but also makes no mention of spending that benefits and directs resources to middle income tax payers: start with the rebate program (not available to high earners), no deductions for local, state taxes etc (under AMT and Schedule phaseouts), lack of financial support at all levels (e.g. try to get help for college loans when you start making any sort of money). State support programs -- just not available. And of course, you can look forward to being taxed on your 401k and not getting Social Security one day when the drunken deficit spending rooster comes home.

Recently my son have serious medical problems; turns out that another "threshold" on my AGI kicked in -- no state support for rehabilitative services - so they would bill us for service: result, no services for him.

But what really pisses me off is that I am made out as slime and somehow a greedy devil for studying, working hard for years, and now finally making money. Being continuously told I am not paying my "fair" share - whatever the f**k that is; usually defined as whatever the percentage is I have to pay to make sure the average person does not take some sort of hit in benefits.

progressive equals pure garbage. another example of nj taxhappy liberals dipping their paws into hardworking taxpayer earnings to support the welfare queens, corrupt politicians, and those glorious state pensions, including the like of Sharp James and Wayne Bryant... i cant wait to move out of state as many others which will leave only the state workers and welfare queens to pay your precious taxes

Income tax is the moral equivalent of paying protection to the mob - if you don't pay, your government will confiscate your property, fine, and/or incarcerate you. Income taxes are convenient for government because they’re inescapable and because the information gathered through filing annually provides intelligence on classes of individuals that may have untapped wealth the state could condemn in the future.

Ability to generate income and/or accumulate capital does not measure quality of life - consumption does. Capital is useless to its shepherd until converted into useful goods and services. Government should attach economic overhead at the point of consumption. Prior to conversion, income is nothing more than capital in its nascent form, capital which fuels the economy for everyone’s benefit except its shepherd until converted. Perhaps we should tax farmers based on the number of stalks of corn they have planted, before knowing whether there will be sufficient rain during the growing season or what sort of economic maladies lie in wait during the year.

Government’s role is to maintain and improve quality of life, protecting people and the environment. If taxes were levied on consumption, government would be motivated to improve quality of life, since its budget could not leap ahead of the people’s ability to pay or willingness to depreciate their economic insurance policy (savings). Savings stabilizes the economy. Income tax is the most efficient means of subverting individual savings ever invented. Almost every species ensures its survival by relying upon distributed control - natural selection does not favor collective parasitism.

Drug dealers, pimps, and bookies don’t report illicit income to avoid self-incrimination, effectively receiving a tax subsidy funded by taxpayers without illicit income sources.

Stop subsidizing criminals and destabilizing the economy – adopt a flat consumption tax levied only on NEW products and services.

This is a well researched and coherently argued commentary. You did, however, neglect to mention that a substantial proportion of NJ's highest earners derive their earnings out-of-state specifically in NYC and so pay NY state income tax and not NJ state income tax. The fact that NJ features NYC bedroom communities means that like CT and similar to NH (which is home to some of Boston's bedroom communities), these cross-state commuters can only contribute to their home state tax revenues through property taxes and sales taxes, hence the relatively high property taxes in each of NJ, CT and NH. This is in stark contrast to CA where almost all residents work in-state so property taxes can be much lower than income taxes. To some extent, NJ's tax policy is constrained by its geography.

I also dont see public spending being too high, i see it as private spending being too low. These guys want to keep as much money as they can. The private sector should part with some more of their money, but it doesnt seem like they are. The whole idea of "the bottom line" is getting out of control as we can see. Maybe my ideas are directed towards the fairness and benefit of everyone and not a few. But i cant help that.