Many New Jersey residents are unlikely to see a significant bump in pay as a result of tax reform, despite a recent Tweet from U.S. Rep. Tom MacArthur, R- N.J., saying 90 percent of Americans soon will see an increase in net pay in their paychecks.
90% of working Americans will see an increase in net pay, thanks to tax reform, and today is payday for millions of people across the country.— Tom MacArthur (@RepTomMacArthur) February 16, 2018
Don't forget to check your check to see what your tax reform pay raise is. pic.twitter.com/2pOnAc4S25
"Don’t forget to check your check to see what your tax reform pay raise is,” said MacArthur in his weekend Twitter post.
MacArthur was the only elected official representing New Jersey to vote in favor of the tax reform law.
The effects on New Jersey businesses have not seen fully yet, as first-quarter earnings have not yet been reported. But the Tax Cuts and Jobs Act decreases annual corporate taxes from 37 percent to 21 percent, and some businesses in the state, such as Flemington Car and Truck Country Family of Brands, announced that they would give their employees one-time bonuses.
Yet the effects on the average New Jersey resident will be minimal, according to New Jersey Policy Perspective, a focus group studying economic issues in the state.
According to a report from NJPP, a New Jersey resident who earns the state’s median household income in 2016, $76,126, will see an average increase of $920 annually, which comes to $35.38 per paycheck, assuming the tax decrease is spread out over 26 pay checks per year.
Residents earning $107,500 to $201,900 per year will see a total tax savings of $1,360, or $52.30 per paycheck. Residents earning $201,901 to $521,900 annually will see a tax savings of $18,330 next year, or $705 per paycheck.
However, state residents – especially homeowners – could also see their federal tax savings negated by the fact that they cannot use state and local taxes as a deduction on their federal income tax, and the deduction for property taxes would be capped at $10,000, and the mortgage interest deduction would only apply for existing mortgages and new homeowners who borrowed $500,000 or less to purchase their homes.
The report also notes that even if the New Jersey government passes a law allowing residents to deduct state and local taxes from their state income taxes, there would still be a large disparity between the highest and lowest income brackets. If New Jersey does vote that bill into law, residents earning $521,900 to $3.2 million would see an average annual tax cut of $27,280 while a resident earning $37,800 to $63,600 would see a tax cut of $520.