New Jersey residents with more than $1 million in annual income would see a tax increase under a bill set to advance in both houses of the state Legislature, but Gov. Chris Christie is expected to veto the measure if it passes.
The bill would raise the top tax rate of 8.97 percent for income above $400,000 to 10.75 percent for income above $1 million.
The measure is strongly opposed by business groups, which see it harming business owners who report business income as personal income.
"The Democratic majority is trying to fund their priorities, but at the end of the day, we know that the governor will not sign it," said David Brogan, first vice president for the New Jersey Business & Industry Association. Christie has vetoed the millionaire's tax twice before, and has said he'll veto it again.
"It affects our competitiveness on a national and regional level," Brogan said.
Brogan praised both the Legislature and Christie for improving the state's business image, including a series of business tax cuts enacted in 2011 that are scheduled to increase over the next year. This tax increase would be a step back from that progress, he said.
Mary Ellen Peppard, assistant vice president for the New Jersey Chamber of Commerce, said the bill is of particular concern to S-corporations and other "pass-through entities" that report business income as personal income.
"This would have a significant impact," Peppard said, noting the increase would make New Jersey's top rate the highest state income tax rate in the region.
She added that the volatility of high-income residents' income makes it an unstable source for taxes.
"It can't be relied upon as a revenue source," Peppard said.