With inflation taking a big bite out of household budgets over the last year, Gov. Phil Murphy and state lawmakers responded by enacting a crop of new tax policies aimed at providing some relief.

How successful these relief measures will become remains to be seen, but many have already reshaped the state budget and are now beginning to influence the tax collections that support it as well.

Perhaps this year’s biggest change in state tax policy has been the establishment of an altogether new direct property-tax relief program called “Anchor” that is funding direct checks and other benefits at levels not seen in over a decade in New Jersey.

To receive the beefed-up relief benefits — totaling as much as $1,500 in some cases — homeowners and renters who meet income standards have until the end of January to submit applications.

• More information about the Anchor program is available from the state Division of Taxation or by calling 1-888-238-1233.

But over the last year, numerous other tax-policy changes have been enacted in New Jersey, including those written in the annual budget adopted at the end of June. Among them is a new child tax credit that provides the biggest benefits to the lowest-income parents.

A late summer back-to-school sales tax holiday was also established this year to ease the burden for parents and others buying school supplies.

Still, not every new tax-related proposal put up for discussion in the Legislature amid a broader focus on affordability issues made it to the finish line this year.

Republicans frustrated

For starters, Republican lawmakers are still pressing their majority Democratic colleagues to enact a measure that would link the state’s income tax brackets to the rate of inflation.

Doing so, they argue, would help protect taxpayers against something known as “bracket creep,” which occurs when rising wages push taxpayers into higher tax brackets, even though they are no better off financially due to coinciding increases in consumer prices.

Establishing a state level tax write-off for charitable contributions also remains on the GOP’s wish list for tax reform.

The average property-tax bill in New Jersey is a record-high $9,284.

The upcoming year is also expected to be a busy one when it comes to tax policies related to remote work, which has become increasingly popular during the COVID-19 pandemic.

And from a budgeting perspective, the governor and lawmakers must also begin preparing for the loss of a corporate-business tax surcharge due to expire in roughly a year.

When it comes to property taxes — a perennial issue in New Jersey — data released by the state Department of Community Affairs earlier this year indicated an increase in the average property-tax bill of more than $170 last year.

That latest increase for New Jersey homeowners pushed the  average property-tax bill to a record-high $9,284, according to the state data.

Anchor up

In response, Murphy and lawmakers announced in late June that they would be overhauling and rebranding the long-standing Homestead property-tax relief benefit, and those efforts eventually resulted in the Anchor program.

In all, more than 2 million residents have been made eligible for Anchor benefits, including some 900,000 tenants who had been locked out of state-funded relief efforts for roughly a decade.

Under Anchor, renters making up to $150,000 are now eligible to receive benefits totaling $450.

‘This is cash on the barrel.’ — Gov. Murphy said of the Anchor program

For nearly 900,000 homeowners making up to $150,000 annually, the benefits will total $1,500 under Anchor, a nickname that is derived from the program’s formal title, which is “Affordable New Jersey Communities for Homeowners and Renters.”

Another nearly 300,000 homeowners making over $150,000 and up to $250,000 annually can receive benefits worth $1,000 if they apply before a Jan. 31 deadline.

The Anchor benefits are based on 2019 residency and income data, and they will be paid out in late spring via check or direct deposit, according to the Murphy administration.

“This is cash on the barrel,” Murphy, a second-term Democrat, said during a recent interview with NJ Spotlight News.

For their part, Democratic legislative leaders also pointed to the establishment of the Anchor program when pressed on issues related to tax relief during a panel discussion in Atlantic City last month as part of the New Jersey League of Municipalities’ annual convention.

Child tax credit

They also highlighted other tax-policy changes enacted as part of the 2023 fiscal year budget, which Murphy signed into law in late June.

Among them was a state-level child tax credit for thousands of New Jersey families with annual incomes up to $80,000. And thanks to a late-year revision, the new tax credit — worth up to $500 per-child under the age of six — can be claimed by eligible parents and families when they file their state tax returns next year.

For those earning up to $30,000 annually, the per-child credits are worth $500; for those earning between $30,000 and $40,000 annually, the credits are worth $400; for those earning between $40,000 and $50,000 annually, they are worth $300; and for those earning between $50,000 and $60,000 annually, they are worth $200. For those earning between $60,000 and $80,000 annually, the credits are worth $100.

While Democratic legislative leaders have been touting their recent efforts, their Republican counterparts have repeatedly pressed them to do more.

The tax break was established as a refundable credit, which means those who are eligible can claim the full amount regardless of what they owe in state income taxes.

In addition, lawmakers also established the annual back-to-school sales-tax holiday, and it was estimated to save parents a combined $75 million in the first year. The sales-tax holiday spanned 10 days beginning in late August, and among the items made temporarily exempt from the sales tax were pens, pencils and notebooks, as well as art supplies, such as paint and paintbrushes.

Also made temporarily exempt from the sales tax were computers costing less than $3,000, along with equipment used for sports and recreation, such as helmets, shoulder pads, shin guards and mouth guards, among other items.

What Democrats highlighted

“The work we have done will have a positive impact on New Jerseyans going forward, and we’re going to continue to work to do that,” Assembly Speaker Craig Coughlin (D-Middlesex) said as he detailed the tax-relief efforts during the recent panel discussion.

But while Democratic legislative leaders have been touting these efforts and others, their Republican counterparts have repeatedly pressed them to do more.

High on the GOP priority list is the adoption of a measure that calls for indexing the state’s income tax brackets to inflation to prevent so-called bracket creep. This is something the federal government has done for decades to ensure tax brackets keep up with annual inflationary changes, but the practice has drawn new attention over the last year as inflation has risen at rates not seen in decades

‘There’s absolutely no reason New Jersey should continue to penalize families with higher taxes for getting small raises that probably aren’t even keeping up with inflation.’ — Sen. Anthony Bucco (R-Morris)

A bill that calls for indexing the state’s income tax brackets to inflation cleared the Senate Budget and Appropriations Committee with bipartisan support in February, but it never made it any further. Assembly Republicans sought to bring an identical version of the bill up for a vote in mid-June, but their efforts were squashed by majority Democrats.

“There’s absolutely no reason New Jersey should continue to penalize families with higher taxes for getting small raises that probably aren’t even keeping up with inflation,” said Sen. Anthony Bucco (R-Morris), a prime sponsor of the legislation after the federal government announced the latest inflationary adjustments for federal tax brackets several weeks ago.

Many Republican lawmakers have also been pressing for the state-level deduction for charitable contributions, arguing it would provide a boost to organizations that have been leaned on heavily during the pandemic. But that legislation has also failed to make it out of the Democratic-controlled Legislature.

Providing tax relief for New Jersey businesses has been another priority for Republican lawmakers; they cite the state’s top-end corporate-business tax rate of 11.5% as an outlier in the Northeast region.

Remote work becomes a tax issue

But that rate is only levied on the highest-earning companies, and it is the result of a 2.5% surtax that is already due to expire on Dec. 31, 2023. While that will ease the tax liability for top-earning businesses, the sunsetting of the surcharge is likely to cost the state budget an estimated $300 million in the near term, according to recent Department of Treasury budget estimates.

Meanwhile, as remote-work arrangements have become more prevalent during the ongoing pandemic, lawmakers have also yet to adopt legislation that seeks to level the playing field with states like New York that claim a right to collect taxes from out-of-state residents even when they are working from home in other states, including New Jersey.

‘This bill is a good first step, sending a clear message to our neighboring state that we won’t stand back and allow the current imbalance to continue.’ — Sen. Jon Bramnick (R-Union)

Among other provisions, the measure would establish tax credits that could incentivize out-of-state companies to create new locations in New Jersey so in-state remote workers could be assigned to them, thus making their income only subject to New Jersey taxation.

The same legislation — which recently cleared a key committee hurdle in the Senate — would also change state tax law so New Jersey would be able to tax residents of other states who work for companies located across state lines in the same way those states, including New York, have been treating New Jersey residents working remotely.

In a bid to address the policy imbalance with states like New York, New Jersey would also establish its own “convenience of the employer” tax law, but only one that would apply to the income earned by people who work for companies based in New Jersey but reside in states like New York that have already established their own convenience tax laws, according to the bill.

“This bill is a good first step, sending a clear message to our neighboring state that we won’t stand back and allow the current imbalance to continue,” said Sen. Jon Bramnick (R-Union), a primary sponsor of the bill.