US state to tax super rich to pay for pandemic costs

18 Sep 20

New Jersey has adopted a so-called ‘millionaires tax’ in light of the fiscal pressures of Covid-19.

 

By increasing income tax on earnings between $1m and $5m per year from 8.97% to 10.75%, state officials said they hope to make taxation more fair and ensure that the response to the pandemic is paid for by those who can best afford it.

“In this unprecedented time, when so many middle-class families and others have sacrificed a great deal, now is the time to ensure that the wealthiest among us are also called to make a modest sacrifice by paying pennies on the dollar more for any income over $1m,” said governor Phil Murphy.

The change will bring the rate back in line with the rate of 2010, and will come into force in the US’s coming financial year, which begins in October.

Murphy’s office said the step was “especially critical given the financial realities exacerbated by the ongoing Covid-19 pandemic”, and the move is expected to raise $390m in the first year.

Early in the pandemic, the New Jersey government projected the state could face a shortfall of more than $10bn in its revenues by the end of the next fiscal year if no new taxes were raised.

Alongside the millionaires tax, officials announced a rebate of up to $500 for families with incomes under $150,000 per couple, or $75,000 for a single person, with at least one dependent child.

“The agreement that we reached will provide much-needed tax relief for so many who can truly use a break,” said Craig Coughlin, speaker of New Jersey’s assembly.

“It has always been a priority of all of us to help the middle class. The small increase has long been part of governor Murphy’s plan of tax fairness, and it will generate much-needed revenue that will allow assistance to those desperately in need.”

Other elements of the budget are still being negotiated, and will be announced later in the month.

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