New Jersey Taxpayer Education Tour – Part 2

In our previous post we provided a high-level overview of the spending side of New Jersey’s state budget. Today, we’ll take a look at the revenue side and again compare the changes from 1998 to 2008

This year, the state’s income tax will generate $12.4 billion - more than all other state taxes, fees and revenue sources combined, with the exception of the state’s sales tax. The sales tax will bring in $8.8 billion and everything else, a total of $10.8 billion. In total, state revenue has increased by 86 percent or $14.8 billion since 1998.

New Jersey’s actual revenue for 1998, $17.2 billion, was greater than budgeted spending, $16.4 billion. The reverse was true for 2008, where budgeted spending, $33.3 billion, was greater than reoccurring budgeted revenue, $32 billion.

New Jersey State Budget
Revenue Sources
1998 vs 2008
(In Thousands)

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Revenue from the state’s income tax has increased 121 percent since 1998 and now comprises 39 percent of total state revenue. That’s up significantly from1998 when the income tax paid for about one-third of state spending.

Increasingly, New Jersey relies on families earning a $100,000 or more to support the state’s spending. As Governor Jon Corzine explained in his 2008 Budget in Brief, 85 percent of the state’s income tax revenue is paid by 20 percent of the state’s income tax paying households. Income tax revenue for 2008 is projected to be $6.8 billion more than in 1998.

Sales tax revenue has increased 84 percent, and supports about 28 percent of the state’s budget, as it did in1998. In the fall of 2006, the state’s sales tax was increased from 6% to 7% and expanded to cover additional goods and services. For 2008, sales tax revenue is projected to generate $1.9 billion more revenue than in 2006 and $4 billion more than 1998.

In total, all other taxes, fees and state revenue sources have increased by 58 percent or $4 billion, and now support just 34 percent of the state’s budget, as compared to 40 percent in 1998.

New Jersey State Budget
Revenue Sources By Category
1998 vs 2008
(In thousands)

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The corporation and bank tax is New Jersey’s third largest revenue source. Revenue from this tax has increased by 82 percent in the ten year period, although projected to take in less for 2008 than its peak of $3 billion in 2006. This tax category still supports about 7.5 percent of state spending as it did in 1998.

The inheritance tax ($602 million) is now the state’s fourth largest tax, fifth, if you count the Lottery ($848 million) as a tax. The motor fuels tax ($580 million) has fallen to sixth place. The insurance premium tax ($503 million) rounds out the list of state taxes generating more than a half-billion dollars annually.

Of New Jersey’s other major revenue sources, the realty transfer tax ($380 million) was the largest percent gainer, increasing 500 percent since 1998. On the losing side, motor vehicle fees ($278 million) are down 25 percent and cigarette tax revenue ($252 million) is down 23 percent. While revenue is down, the cigarette tax has increased from 40 cents a pack to $2.58 during this ten year period.

The state’s take from all other taxes, fees and revenue sources has increased 82 percent since 1998 and will generate a total of $4.3 billion in 2008.

Revenue source as a percent of the state’s total is shown in the chart below. Only two taxes carry a heavier load in 2008 than in 1998 – the income tax, shouldering 6 percent more of the budget and the reality transfer tax, 0.6 percent more.

New Jersey State Budget
Revenue Source As A Percent Of Total
1998 vs 2008
(In thousands)

Click to Enlarge

Data Sources: New Jersey Department of the Treasury – Office of Management and Budget and State of New Jersey Division of Taxation