Tax Credits for Working Families

New Jersey

Earned Income Tax Credit^

Income Tax Rate: Graduated 1.4-10.75 percent

State EITC: Yes

Refundable: Yes

Enacted: 2000

Formula: 25 percent of the federal credit for tax year 2009; 20 percent of the federal credit for tax year 2010 onwards.

Notes/News: In June 2010, the legislature passed and Governor Chris Christie signed into law a bill that reduced the EITC from 25 to 20 percent.1 In fiscal year 2009, New Jersey filers claimed $218 million worth of state earned income credits.2

On June 30, 2011, Governor Chris Christie line-item vetoed a provision that would have reversed last year’s $45 million cut to the state EITC, which reduced the credit from 25 to 20 percent of the federal EITC.

In his State of the State address on January 18, 2012, New Jersey Gov. Chris Christie pledged to restore the state EITC, which he had previously vetoed. However, the restoration of the EITC could be contingent on a 10 percent across-the-board cut to income tax rates, the cornerstone policy proposal in Christie’s speech that has garnered criticism from Democratic leaders who say tax cuts for all income tax brackets would mostly go to the state’s wealthiest households.

On June 25, the New Jersey state Assembly adopted a bill  (A3029, S1141) to increase the EITC from 20 percent to 25 percent of the federal credit after a 48-31 vote. The Senate passed the same bill on June 28. On June 30, Governor Christie vetoed it, refusing to sign it unless it was part of a larger tax cut for all New Jerseyans. If the bill had passed, the average tax credit would have jumped from $430 to $545 per year for more than 500,000 New Jersey taxpayers.

On September 24, Assembly Republicans introduced the Tax Relief for New Jersey Families Act, which is almost identical to an earlier proposal by Democratic Senate President Stephen Sweeney. The bill, A3235, would restore the state EITC to 25 percent of the federal credit, beginning in 2013, while also increasing the state’s circuit breaker Homestead Rebate and creating a property tax credit capped at $1,000 for residents earning up to $400,000 per year. Christie has said he would keep refusing to restore the EITC unless the state passes a tax cut – like the property tax credit proposed in this bill – that benefits people making up to $400,000 per year. Democrats support the ideas in the proposal but are only willing to pass the bill if the economy and state revenues pick up in the next three months.

On January 28, 2013, Christie conditionally vetoed a bill to increase the state’s minimum wage by $1.25 an hour, countering with a scaled-back plan to implement a smaller increase while providing direct relief to struggling working families through an increase to the state’s EITC from 20 percent to 25 percent of the federal credit. “To make certain that New Jersey’s working families are on the strongest economic footing possible to continue their economic progress, today I am also proposing that the benefit amounts provided under the New Jersey Earned Income Tax Credit program be increased by 25 percent,” said Governor Christie. “My plan will give workers the additional income and relief that will spur consumer spending and help grow strong, sound families.”

In February 2013, by a 27-1 vote, the Senate approved an alternate bill, S-2535, that is not tied to a minimum wage increase but will fully restore the state’s EITC to 25 percent of the federal credit. On February 14 the Assembly also passed the bill, but it was conditionally vetoed by the Governor in order to revive his original tax cut plan to create an income tax credit of 10 percent for New Jersey homeowners making less than $400,000.

On June 24, 2013, the legislature voted on a budget deal negotiated between the legislature and the governor which does not restore the EITC to 25 percent.

In June, 2014, the legislature passed a budget which once again included a restoration of the EITC to 25 percent, but the governor line-item vetoed it in July.

Reports/Materials: New Jersey Should Build on Minimum Wage Increase by Restoring Earned Income Tax Credit, Jon Whiten, New Jersey Policy Perspective, September 2014

New Jersey Fact Sheet: Tax Credits Promote Work and Fight Poverty, Center on Budget and Policy Priorities, March 2014

New Jersey State & Local Taxes, from Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, January 2013

Impact of Not Overriding Governor’s Veto Regarding EITC and NJ FamilyCare, New Jersey Policy Perspective, July 2011

1 in 6 New Jerseyans Hit By Governor’s Vetoes, Raymond J. Castro, New Jersey Policy Perspective, July 2011

New Jersey State and Local Taxes in 2007, Institute on Taxation and Economic Policy, November 2009

The Earned Income Tax Credit: Extra Money for People Who Work, Association for Children of New Jersey

Expanding the New Jersey Income Tax: Facts and Figures”, Association for Children of New Jersey

Look Out Below: Steep “Cliff” Means Many Working Poor Lose Tax Credit, Sarah Stecker, New Jersey Policy Perspectives, January 2007

A Great Idea, Association for Children of New Jersey, April 2003

Editorial: Budget deal good, but the news is all bad, Herald News, June 23, 2010

Outreach: An Earned Income Tax Credit for New Jersey’s Working Families, Jeannette Russo, Association for Children of New Jersey, December 8, 1999

Child Tax Credit^

State Credit: No

Child and Dependent Care Tax Credit^

State Credit: No

Property Tax Circuit Breaker^

Circuit Breaker: Yes

Refundable: No

Eligibility: The Homestead Rebate is available for homeowners that own and reside in their New Jersey home as of October 1 of each tax year and do not live in a tax-exempt home. Those either over 65 or disabled must have a gross income below $150,000; those under 65 and not disabled must have a gross income below $75,000.

Formula: For homeowners under 65 and not disabled the formula is calculated as follows:

Household Income

Rebate amount calculated by

< $50,000

Multiplying the amount of  the property taxes paid on that residence in 2006 (up to $10,000) by 10 percent

$50,000-$75,000

Multiplying the amount of  the property taxes paid on that residence in 2006 (up to $10,000) by 6.67 percent

> $75,000

Not eligible

For homeowners over 65 or disabled the circuit breaker credit is calculated as the larger of two formulas:

Household Income

Percentage of the first $10,000 in 2006 property taxes3

≤$100,000

10 percent

$100,001-150,000

5 percent

>$150,000

Not eligible

Notes/News: New Jersey’s Homestead Rebate program for renters was eliminated for property tax years 2010 and 2011. (Under the New Jersey system, taxpayers would apply for the 2011 Homestead program in 2012 and it would be applied to their 2013 tax bill). New Jersey also offers a property tax credit, as well as a deduction; however these are not circuit breakers. Individuals who claim the Homestead Rebate are not eligible to claim either the property tax credit or the deduction.

On September 24, New Jersey Assembly Republicans introduced the Tax Relief for New Jersey Families Act, which is almost identical to an earlier proposal by Democratic Senate President Stephen Sweeney. The bill, A3235, would bolster the state’s circuit breaker Homestead Rebate by increasing the credit for renters from $50 to $100 beginning in 2013, to $150 beginning in 2014, and to $200 beginning in 2015 and thereafter. The bill would also restore the state’s EITC to 25 percent of the federal credit, and create a 10 percent property tax credit capped at $1,000 for residents earning up to $400,000 per year. Democrats support the ideas in the proposal but are only willing to pass the bill if the economy and state revenues pick up in the next three months.

On June 24, 2013, the legislature voted on a budget deal negotiated between the legislature and the governor which defers the payment of the property tax circuit breaker Homestead Rebate from May to August, thus deferring $392 million in state expenses into the next fiscal year, and making the elderly and poor wait three more months for their refunds.

In May, 2014, the State Treasurer told lawmakers that nearly $395 million in property tax relief including the Homestead Rebate would be delayed by nine months in an effort to help manage an expected revenue squeeze when the new fiscal year arrives in July. In June 2014 the legislature passed a budget that would require the Homestead Rebate to be paid in August, 2014.  However, when the governor signed the budget he line-item vetoed this provision.

Reports/Materials: Why Significant, Lasting Property Tax Reform is So Difficult, New Jersey Policy Perspective, September 2013

1 AB 3016

2 A Report on Tax Expenditures in New Jersey, State of New Jersey Department of Treasury Division of Taxation, Cheryl Fulmer, March 1, 2010

3 2009 Homestead Benefit Amount for Homeowners age 65 or older and or Disable on December 31, 2009, State of New Jersey Department of Treasury Division of Taxation, October 19, 2010