New Jersey is 7th Worst State for Income Inequality

New Jersey Among States with Highest Income Inequality

Concentrated Wealth Creating Significant Barriers to Economic Opportunity for Too Many New Jerseyans

New Jersey is among the states with the highest income inequality in the country, according to a new report from the Center on Budget and Policy Priorities. And by eliminating taxes on inherited wealth while further eroding the state’s ability to reduce barriers to opportunity for low-income and working-class families across the state, New Jersey’s policymakers took the state even further in the wrong direction this year.

The Garden State ranks 7th in the country for income inequality, with its richest residents— the top 5 percent of households— having average incomes 15.6 times as large as the bottom 20 percent of households.


  • When comparing the top 20 percent of households with the bottom 20 percent, New Jersey fares even worse compared to other states: it is the 5th highest in the nation, with the top 20 percent having average incomes 9.4 times as large as the bottom 20 percent.
  • Overall, the top 20 percent of New Jersey’s households receive nearly half (46 percent) of the state’s income, even without counting capital gains – and the top 5 percent receive 19 percent.
  • That trend has intensified in recent decades: between 1979 and 2013, incomes for the wealthiest 1 percent of New Jersey households grew by 190 percent – a rate 9.5 times as fast as the income growth for the bottom 99 percent of households.

The report, How State Tax Policies Can Stop Increasing Inequality and Start Reducing It, also shows that the concentration of income among the wealthiest residents is striking in every state – reflecting three and a half decades of unequal income growth:

  • The top 1 percent’s share of income rose in every state and the District of Columbia — and it doubled nationally, from 10 percent to 20 percent — between 1979 and 2013, according to a recent analysis of IRS data.
  • The average income of the top 5 percent of households in every state is at least 10 times that of the bottom 20 percent, even excluding capital gains.
  • In the typical state, the average income of the richest 5 percent of families ($325,928) dwarfs that of the poorest 20 percent ($22,014) and middle-income families ($66,165).
  • In 17 states, the top 20 percent of households received more than 45 percent − close to half −of all income in the state, excluding capital gains.

For more than three decades, income gains in the American economy have accrued largely to the richest households, while many middle and lower-income Americans haven’t shared in the nation’s growing prosperity.  This has reduced opportunities for working people striving to get ahead and weakened our overall economy.

Yes, the growth in inequality reflects many economic trends that are outside state lawmakers’ control. But New Jersey policymakers can make matters worse or better. Unfortunately, most of the recent major actions taken in the Garden State – from eliminating the estate tax this year to giving a big tax cut to the state’s wealthiest families in 2010 to promising billions in future tax breaks to profitable and well-connected corporations – will ensure that far too many New Jerseyans will continue to face barriers to economic opportunity.

The report offers recommendations about how state tax policies can be used to begin to reduce inequality. They include:

  • Retain or expand taxes on inherited wealth, such as the estate tax
  • Eliminate costly and ineff­ective tax breaks for corporations
  • Broaden the sales tax base to include more services consumed by wealthy individuals — such as investment counseling or country club memberships
  • Maintain an overall tax system that raises sufficient revenue to pay for the building blocks of shared prosperity