In Fiscal Year (FY) 2016, New Jersey collected $60.2 billion in state and local taxes—or $6,709 for every man, woman, and child. While this is an impressive sum of money, it tells us little about whether or not the average New Jersey taxpayer can afford this level of taxation?
To better answer this question, this analysis will calculate New Jersey’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.
As shown in Chart 1, New Jersey’s state and local tax burden (tax collections divided by private sector personal income) was the eighteenth highest in the nation for FY 2016 at 14.7 percent—or 3 percent above the national average of 14.3 percent.
#NewJersey state and local #taxburden in FY 2016 was the 18th highest in the nation at 14.7%— 3% above US average of 14.3% http://bit.ly/2FX9C8F @keypolicydata #NJpolitics #NJleg #NJsen #NJgov #PolicyData (click to tweet)
As shown in Chart 2, New Jersey’s tax burden has increased over time by 85 percent to 14.7 percent in FY 2016 from 7.5 percent in FY 1950.
To put New Jersey’s tax burden into perspective, let’s compare it to size of major industries in the state (as a percent of private sector income). As shown in Chart 3, New Jersey’s 14.7 percent tax burden is greater than these combined industries: manufacturing (6.7 percent), construction (4.8 percent), and information (2.6 percent).
New Jersey’s higher than average tax burden is driven by a high property tax burden (6.8 percent, 5th highest) and a high corporate income tax burden (0.5 percent, 15th highest). This is partially offset by a low sales tax burden (2.3 percent, 11th lowest) and all other tax burden (1.2 percent, 3rd lowest)
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in New Jersey—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
New Jersey only has 21 counties and their local government tax burden are shown below (highest to lowest):
Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 66 years! See if your state has been above or below the national average?
Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.