FISCAL NOTE TO


ASSEMBLY, No. 1154


STATE OF NEW JERSEY

 

DATED: JANUARY 22, 1997

 

 

BILL SUMMARY

 

      Assembly Bill No.1154 of 1996 allows taxpayers to exclude the first $3,500 received as interest or dividends under the State's gross income tax. Currently taxpayers may exclude the interest gain from specialized investment instruments like tax exempt bonds or qualified tax exempt mutual funds. The exclusion in this bill would apply to the earnings of a savings account, a certificate of deposit, or the dividends of common stock.

 

AGENCY COMMENTS

 

      The Department of the Treasury estimates that this bill will reduce State income tax revenues by approximately $34 million in fiscal year 1997, $73 million in fiscal year 1998, and $78 million in fiscal year 1999. The Treasury estimate is based on a sample of 1993 gross income tax returns filed with the Division of Taxation and assumes an effective date of January 1, 1997.

 

OFFICE OF LEGISLATIVE SERVICES COMMENTS

 

      The Office of Legislative Services (OLS) concurs with the Treasury estimate. The OLS does not have the 1993 sample data used by the Division of Taxation, but aggregate data from 1992 and 1993 returns suggest revenue losses similar to or even larger than those estimated by the Division. Revenue losses could vary widely from year to year as income from interest and dividends varies. For example, taxable interest income fell by more that 20 percent, from over $5.0 billion to under $4.0 billion, between taxable years 1992 and 1993 (the most recent years of data available). On the other hand, the sizable appreciation of common stocks in 1995 and 1996 suggest a significant increase in dividend income since 1993.

 

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