In New Jersey, Poor and Middle-Income Families Pay Greater Share of State & Local Taxes Than the Wealthy

Comprehensive New 50-State Study Shows New Jersey’s Tax System Has Gotten More Regressive in Recent Years

Who Pays?

Like most state tax systems, New Jersey takes a larger share from middle- and low-income families than from wealthy families, according to the fourth edition of Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, released today by the Washington- based Institute on Taxation and Economic Policy (ITEP).

Combining all of the state and local income, property, sales and excise taxes New Jerseyans pay, the average overall effective tax rates by income group are 11.2 percent for the bottom 20 percent, 9.1 percent for the middle 20 percent and 7 percent for the top one percent. Nationally, those figures are 11.1 percent for the bottom 20 percent, 9.4 percent for the middle 20 percent and 5.6 percent for the top one percent. The full report is online at

New Jersey doesn’t count among the most regressive states in the U.S. in large part due to the relative progressivity of its income tax. But since New Jersey has a heavy reliance on more regressive property taxes, it doesn’t rank among the fairest tax states either.

And unfortunately, New Jersey’s tax system has gotten more regressive since 2007. In that year, the average overall effective tax rates by New Jersey income group were 10.7 percent for the bottom 20 percent, 8.6 percent for the middle 20 percent and 7.4 percent for the top one percent. This can be attributed to, in large part, the enormous strain that rising property taxes have placed on middle- and lower-income homeowners and renters.

The income tax in particular is being targeted for reduction – or even outright elimination – by self-described tax reformers across the country, including New Jersey Gov. Chris Christie, who pushed hard for a 10 percent income tax cut last year. Who Pays? shows that of the ten most regressive states, four do not have any taxes on personal income, one state applies it only to interest and dividends and the other five have a personal income tax that is flat or virtually flat across all income groups.

“The relatively progressive character of New Jersey’s tax structure is endangered by the fiction that New Jersey’s slow recovery from the Great Recession is due to high taxes,” says New Jersey Policy Perspective president Gordon MacInnes. “The dominant idea among our leaders then becomes that we need to cut taxes, particularly the income tax, and further dismantle state revenues. Instead, we should shift the focus towards making the tax system fairer, while also expanding opportunities for struggling families and investing in the institutions and partnerships that can produce good jobs.”

“We know that governors nationwide are promising to cut or eliminate taxes, but the question is who’s going to pay for it,” says Matthew Gardner, Executive Director of ITEP and an author of the study. “There’s a good chance it’s the so-called takers who spend so much on necessities that they pay an effective tax rate of 10 or more percent, due largely to sales and property taxes.” State consumption tax structures are particularly regressive, with an average 7 percent rate for the poor, a 4.6 percent rate for middle incomes and a 0.9 percent rate for the wealthiest taxpayers nationwide.

The fourth edition of Who Pays? measures the state and local taxes paid by different income groups in 2013 (at 2010 income levels including the impact of tax changes enacted through January 2, 2013) as shares of income for every state and the District of Columbia. The report is available online at

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