FISCAL NOTE TO

ASSEMBLY No. 1176

STATE OF NEW JERSEY

DATED: JUNE 19, 1997

      Assembly Bill No. 1176 of 1996 would amend the New Jersey Gross Income Tax Act to provide a $20,000 exclusion for all taxpayers receiving retirement income who are 55 years of age or older. Presently, married couples are allowed an exclusion of $10,000 and single taxpayers are allowed a $7,500 exclusion provided they are 62 years of age or older.

      The Division of Taxation prepared a fiscal note for the bill, assuming the bill took effect January 1, 1997. The division estimates the loss of revenue to the Property Tax Relief Fund would be $24.2 million in fiscal year 1997, $50.5 million in fiscal year 1998, $54.5 million in fiscal year 1999 and continuing to grow annually thereafter. The losses have been projected by comparing actual tax liabilities owed the State with tax liabilities created by the proposed changes. The division prepared the estimates using a sample of approximately 79,000 Gross Income Tax returns filed for tax year 1993 with liabilities owed the State. The division indicates it projected relevant gross income components to 1999 using personal income growth rates presented in the New Jersey Economic Review and Outlook prepared by the division's Office of Tax Analysis.

      The Office of Legislative Services considers the estimation process described by the division to be reasonable. If the bill is enacted by January 1, 1998, there would be no fiscal impact on fiscal year 1997 and a small impact on fiscal year 1998. The full $54.5 million impact projected by the division would occur in fiscal year 1999.

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