Ciattarelli’s income tax proposal would be expensive for New Jerseyans

Republican gubernatorial candidate Jack Ciattarelli’s suggestion that income taxes should be lowered for the highest earners would generate substantial costs for the state of New Jersey if it were implemented, experts say.

Ciattarelli has been advocating for cutting wealthy people’s taxes, both on his website and in public statements, for months. Ciattarelli’s campaign did not respond to a request for comment on this story.

“We’re going to look at every option as to how to better fund our state government,” Ciattarelli said at a June campaign rally, NorthJersey.com reported. “But I will say this, at the very least we’re going to restructure and simplify our income tax rates. Pennsylvania has a three percent flat tax for everybody. We’ve got eight brackets that go up as high as 10.75 [percent]. Think about that. Yeah. So we’re gonna simplify it. I’m in favor at the very least of three brackets – 3%, 4%, 5%”

This proposal would free up cash for the New Jerseyans who are least starved for it. The top two tax rates of 8.97% and 10.75% apply to residents earning between $500,000 and $1 million and over $1 million, respectively. Families earning under $300,000 per year pay 3.25%, and the rate goes down to 1.4% for those earning $100,000 or less.

According to the state’s 2025-2026 tax and revenue outlook, New Jersey is projected to take in approximately $21 billion in income tax revenue during the current fiscal year, amounting to about 37% of its total projected revenue during that time frame; the 6.625% sales tax is expected to account for about 26% of the state revenue during the same period.

New Jersey does not publish data breaking down revenue by tax bracket, but New Jersey Policy Perspective data shows that as of 2014, there were approximately 55,000 tax filers in New Jersey earning more than $500,000, all of whom pay taxes to the state.

Economist Dean Baker, co-founder of the nonpartisan Center for Economic and Policy Research, told the New Jersey Independent that he estimates the losses from such a policy could reach into the billions of dollars.

“If you were just to do a crude calculation where you say, OK, we’re taxing it at 5% rather than 10.5%, you get … a loss of just over $3 billion and $50 million,” he said.

Baker said that estimate is based on no changes in behavior. Factoring in an assumption that lower income taxes may lead more people to move to New Jersey, he said he adjusted his numbers up by 20%, which would still result in a revenue loss of about $2.5 billion per year.

Baker said there are really only two options to deal with a revenue loss like what would occur if Ciattarelli had his way: either raise sales tax or cut state services.

“To make that up with an increase in sales tax, you’d have to increase to 9.6%,” Baker said. “I mean, I don’t know how you deal with losing two and a half billion in revenue every year.”

He said if sales tax were to increase to make up the difference, New Jersey would probably see significant changes in consumer spending behavior, too, making the revenue less certain.

“If you’re doing a big purchase, if you’re getting a thousand dollar TV or something big, probably a lot of people will just cross the river and save themselves an extra 50 bucks,” he said. “So likely you’re talking about a sales tax somewhat over 10% to offset that loss in revenue.”

Sales tax increases would almost certainly hit low-income New Jerseyans quite hard.

“It’s just really hard to understand why we’re cutting taxes for billionaires, and then to counteract the effects of tariffs and cuts to programs that people rely on, the answer is going to be to increase the sales tax in New Jersey?” Basking Ridge mother Theresa Luoni said. “So you’re asking the same people living in poverty and the working class citizens to pay more when — I can’t speak for everyone, but for people living in poverty, we’ve got nothing left to cut.”

Experts have previously told the American Independent that tax structures reliant on sales tax lean heavily on low income earners. When sales tax replaces income tax as a key source of revenue, lower-income taxpayers end up paying a far greater percentage of their income in taxes than higher-income taxpayers, Aidan Davis, state policy director for the Institute on Taxation and Economic Policy, told the New Jersey Independent in September.

“We found that eight of the 10 states with the most regressive tax systems, meaning that they asked the most of low- and middle-income families as a result of the way that they levy their state and local taxes, they rely heavily — very heavily — on sales and excise taxes,” Davis said. “They derive more than half of their tax revenue from these taxes compared to the national average, which is more in line with about a third.”