New Jerseyans bear heaviest state, local tax burden in nation

August 6, 2008  GANNETT STATE BUREAU

New Jersey taxpayers bear the heaviest state and local tax burden in the country for the third year in a row, according to a report released Wednesday by a fiscal policy organization in Washington D.C.

The Tax Foundation found the state's residents paid 11.8 percent of their income in state and local taxes. The national average is 9.7 percent.

Taxpayers in New York and Connecticut aren't far behind. Residents in those states pay 11.7 percent and 11.1 percent of their income to state and local taxes respectively.

They are the only three states where taxpayers give up more than 11 percent of their income in state-local taxes, according to the report.

"The people in that region have set a high standard for acceptable government services," said William Ahern, a spokesman for the foundation. The large number of high-paying jobs around New York City drives up taxable property values in the area, he said.

"It's certainly not surprising New Jersey is in the top five or six, but being number one and beating out New York takes some doing," said Ahern, who noted New York held the top spot every year from the late 1970s to 2005.

Compared with other states, New Jersey also has one of the highest local-tax rates and the most taxing entities, Ahern said.

Tom Vincz, a spokesman for the state's Treasury Department, called the report a "myopic snapshot" with no basis in reality.

"This report is heavily biased against Northeastern states, which enjoy the highest household incomes and the highest quality of life in the nation," Vincz said. "It makes no mention of the services provided by state, nor does it take into account economic stability over time." New Jersey hasn't raised state taxes in two years despite budgetary pressure, Vincz said. The National Governors' Association also found New Jersey had cut taxes more than all but two other states in the country in fiscal year 2008, Vincz said.

Steve Lonegan, a conservative activist who heads the New Jersey chapter of Americans for Prosperity, said high taxes are the price the state's residents are paying for big government, entitlement programs and state Supreme Court rulings such as the Abbott school funding decision. He predicted New Jersey will keep the report's top spot for quite some time.

"In this state, taxation is becoming destructive," Lonegan said. "This report will influence the decisions of people in the business community, especially those who are considering moving out of the state. It will encourage them to do so."

The Tax Foundation tallies state- and local-tax collections differently from the U.S. Census Bureau. While the Census Bureau counts the tax payments of nonresidents such as commuters, tourists and business owners in the taxing state, the foundation counts them toward the taxpayers' residential state. The foundation believes this methodology provides more accurate data, Ahern said.

The report found taxpayers in Alaska and Nevada pay the least at 6.4 percent and 6.6 percent respectively.

The most recent estimates are for fiscal year 2008, which ended June 30. The foundation has monitored federal, state and local fiscal policy since 1937. It started doing its state-local tax burden study in 1990.

"We're trying to make a statement about the people, the taxpayers in each state," Ahern said.