LEGISLATIVE FISCAL ESTIMATE TO


[First Reprint]

SENATE, No. 988


STATE OF NEW JERSEY

 

DATED: JUNE 20, 1996

 

 

      Senate Bill No.988 (1R) of 1996 provides a $3,000 deduction from the gross income of a New Jersey taxpayer who provides more than one-half of the support of a relative, at least 70 years of age and who lives in the taxpayer's home for at least six months of the taxable year. To qualify for the deduction, the gross income of a taxpayer filing an individual return may not exceed $35,000 and the gross income of a taxpayer filing a joint return may not exceed $50,000.

 

FISCAL IMPACT:

      The Department of the Treasury and the Office of Management and Budget have not provided a fiscal estimate of the cost of this bill. The Office of Legislative Services (OLS) estimates that Senate Bill No.988 (1R) would cost the State approximately $4.2 million in reduced gross income tax collections annually. Approximately 90,000 tax deductions may be claimed at an average tax savings of about $47 per deduction. Some taxpayers may claim more than one deduction, depending on the number of eligible dependents.

 

ASSUMPTIONS:

      Precise data for estimating the cost of this bill are not available. For taxpayers within the eligible gross income categories, State tax figures from the 1992 tax year indicate that approximately 80,000 filers claimed about 150,000 exemptions for "other dependents" (largely dependents who are not children or students). However, the tax data do not distinguish between exemptions claimed for senior citizens living with their children, dependent handicapped adults, or other adult dependents.

      National 1990 Census data indicate that about 13 percent of people aged 65 and older live with relatives who are not their spouse. In New Jersey this percentage would suggest that about 130,000 of the State's 65 and older population live in a relative's household. The bill prescribes an age limit of 70 years or older, so about two-thirds of these people, or 90,000, may be eligible. The 90,000 estimated figure is consistent with the 150,000 exemptions claimed for other dependents by New Jersey taxpayers in 1992.

      At the lowest marginal tax rate of 1.4 percent, the $3,000 additional deduction would result in a tax savings of $42.00. At the next highest marginal tax rate of 1.75 percent the net tax savings would be $52.00 per deduction. Since filers at higher gross income levels are excluded, the average additional tax savings would be about $47.00 per deduction.

      Assuming 90,000 deductions at an average value of about $47.00, this bill would cost the State $4.2 million annually. Costs would increase or decrease with the number of deductions claimed.

      The legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

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