FISCAL NOTE TO

ASSEMBLY, No. 518

STATE OF NEW JERSEY

DATED: SEPTEMBER 13, 1996

      Assembly Bill No.518 of 1996 would create a gross income tax deduction for taxpayers who spend money in support of a member of the taxpayer’s family who is 65 years of age or older. The deduction would equal $1,000 or the amount actually expended, whichever is less.

      The Division of Taxation has prepared a fiscal note to the bill but has refrained from making an estimate of the potential loss of gross income tax revenue. The Division states that the provisions of the bill are too broad, failing to define “family member.” The Division suggests the bill could make the entire senior citizen population in New Jersey eligible for the proposed deduction depending on the interpretation of the bill. Under this circumstance, the 1990 census count of 1.03 million persons in the State 65 years and older could be eligible for the deduction plus the estimated annual increase of 11,000 persons. The Division's fiscal note indicates the deduction could amount to as much as $1.04 billion from taxable income. At an average effective gross income tax rate of 3.75 percent, deductions at this level would reduce gross income tax receipts by $39 million.

      The Office of Legislative Services (OLS) agrees with the division in its assertions, noting the OLS cited some of the same points in a Legislative Fiscal Estimate to Assembly Bill No.247 of 1994. That fiscal estimate also noted that the wording of the bill does not limit the support deduction to senior citizens or taxpayers who reside in New Jersey. Accordingly the cost to the State could be much more than the amount suggested in the Division’s example.

This fiscal note has been prepared pursuant to P.L.1980, c.67.