Fact check/Does New Jersey lead the nation in tax burden and pension debt?
Fact check: Does New Jersey lead the nation in tax burden and pension debt?
The seal of New Jersey
March 23, 2017
By Sara Reynolds
Four New Jersey Democrats introduced a bill earlier this year that would use revenue from taxes paid by electricity customers to further subsidize solar projects.[1] Rep. Tim Eustace, one of the bill sponsors, said solar panel use is "cutting energy costs and, most importantly, moving the state toward a greener, more environmentally responsible future."[2]
Expressing opposition to the measure, an editorial in the Press of Atlantic City claimed that "N.J. politicians already have put a nation-leading tax burden on residents and a nation-leading government pension debt on future generations."[3]
Is the editorial correct? Does New Jersey lead the nation in tax burden and government pension debt?
According to the Tax Foundation's Facts & Figures, New Jersey ranked No. 1 for state and local property tax collections per capita (fiscal year 2014). It ranked seventh in state individual income tax collections per capita, and 16th in sales tax collections per capita (FY 2015).[4]
New Jersey has the sixth highest unfunded pension liability, at $235.5 billion, according to the American Legislative Exchange Council. The Pew Charitable Trusts ranks the state 49th in reducing its outstanding liability.[5][6]
Background
New Jersey Democratic Reps. Tim Eustace, Daniel Benson, Andrew Zwicker, and Benjie Wimberly introduced Assembly Bill A 441, the Solar Power Incentive Program, on January 27, 2016.[7] The bill proposes "to provide financial incentives to owners of solar panel systems and to reduce electric grid congestion" in five specific zones "that would benefit from reduced electric grid congestion."[8] If enacted, owners of the solar panels would be reimbursed 15 percent of the installation cost. Funding for the reimbursements would come from the societal benefits charge (SBC) that is currently collected from customers by utilities.[9][10]
The SBC provides funding for low-income programs, nuclear plant decommissioning, consumer education, and energy demand management programs. SBC rates vary depending on utility company. As of April 2016, annual payments for electric customers ranged between $49 and $65. Annual payments for gas customers ranged between $35 and $50. In total, the SBC generated $850 million in calendar year 2015.[11]
Eustace and former Assemblyman Carmelo Garcia (D-District 33) sponsored similar legislation in 2014-2015.[12] The bill never made it out of committee.[13]
Stefanie Brand, director of the New Jersey Rate Counsel, estimated that if passed, the reimbursements for newly-installed 100 megawatt solar systems would cost ratepayers $43.5 million in the first year.[14]
In 2015, renewable energy supplied five percent of New Jersey’s electricity. Two-thirds of that originated from solar power.[15] The state ranks fourth highest nationwide in the amount of installed solar capacity.[16]
Tax Burden
Tax systems vary considerably among states and localities.[17] According to the Tax Foundation's 2017 Facts & Figures report, property taxes make up 47.5 percent of state and local tax collections in New Jersey, followed by individual income taxes (20.8 percent), general sales taxes (15.4 percent), corporate income taxes (4.1 percent), and other taxes (12.2 percent).[18]
Property Tax
New Jersey ranked first in state and local property tax collections per capita in FY 2014, and has done so since FY 2010. Of the four other states that comprise the top five, property taxes comprise the largest proportion of tax revenues in New Hampshire (66.1 percent) and Connecticut (38.3 percent). In New York and Alaska, property taxes made up the second largest proportion of tax revenue (30.7 percent and 34.9 percent respectively).[4]
| State & local property tax collections per capita, FY 2014 | |
|---|---|
| New Jersey | $3,065 |
| New Hampshire | $2,861 |
| Connecticut | $2,774 |
| Alaska | $2,639 |
| New York | $2,581 |
|
Source: Tax Foundation, "Facts & Figures 2017," accessed March 14, 2017 Table 35 | |
Individual Income Tax
New Jersey ranked seventh for FY 2015 state individual income tax collections per capita at $1,479.[4]
| State individual income tax collections per capita | ||
|---|---|---|
| State | Individual income tax collection per capita (FY 2015) | Rate Range (2017) |
| Connecticut | $2,279 | 3.00% to 6.99% |
| New York | $2,208 | 4.00% to 8.82% |
| Massachusetts | $2,133 | 5.10% |
| California | $1,991 | 1.0% to 13.3% |
| Minnesota | $1,889 | 5.35% to 9.85% |
| Oregon | $1,814 | 5.0% to 9.9% |
| New Jersey | $1,479 | 1.400% to 8.970% |
|
Source: Tax Foundation, "Facts & Figures 2017," accessed March 14, 2017 Table 12 & 13 | ||
When combined with local property taxes (in FY 2014), New Jersey ranked eighth, behind New York, Connecticut, Maryland, Massachusetts, Minnesota, California, and Oregon.[4]
Individual income taxes generated the highest proportion of tax revenue in Oregon (40.8 percent) followed by Maryland (37.4 percent); California (32.2 percent); New York (32.1 percent), and Minnesota (31.3 percent). It made up the second highest proportion of state and local tax revenue in New Jersey (20.8 percent) and Massachusetts (32.6 percent).[4]
General Sales Tax
With a current rate of 6.875 percent, New Jersey ranks sixth in state sales tax rate along with Minnesota (also 6.875 percent). Five other states charge a higher sales tax of 7 percent or more.[4]
| State sales tax rate, January 2017 | |
|---|---|
| California | 7.25% |
| Indiana/Mississippi/Rhode Island/Tennessee | 7.00% |
| New Jersey/Minnesota | 6.875% |
|
Source: Tax Foundation, "Facts & Figures 2017," accessed March 14, 2017 Table 19 | |
The state ranked 16th for state general sales tax collections per capita in FY 2015.[19]
| State general sales tax collections per capita, FY 2015 | |
|---|---|
| Hawaii | $2,090 |
| North Dakota | $1,835 |
| Washington State | $1,746 |
| Nevada | $1,412 |
| Wyoming | $1,384 |
| Texas | $1,226 |
| Mississippi | $1,144 |
| Connecticut | $1,137 |
| South Dakota | $1,131 |
| Indiana | $1,100 |
| New Mexico | $1,082 |
| Florida | $1,075 |
| Arkansas | $1,069 |
| Kansas | $1,049 |
| Ohio | $1,025 |
| New Jersey | $1,021 |
|
Source: Tax Foundation, "Facts & Figures 2017," accessed March 14, 2017 Table 20 | |
Pension Debt
New Jersey public pensions are "the state mechanism by which state and many local government employees in New Jersey receive retirement benefits."[20]
A report published by the American Legislative Exchange Council (ALEC), Unaccountable and Unaffordable 2016, measured the total unfunded pension liability for all 50 states using a 2.344 percent rate of return on pension fund investments.[21] New Jersey’s total unfunded pension liability was $235.5 billion in 2016 ($26,288 per capita). Five states had a greater unfunded liability, and four states had a higher per-capita unfunded liability.[22]
The Pew Charitable Trusts calculated pension debt based on a higher rate of return used by states (the average is 7.62 percent).[23] Under this calculation, New Jersey had a pension debt of $113.1 million, second highest behind California, which had $153 million in pension debt, in FY 2014.[6]
| Unfunded pension obligations | ||||
|---|---|---|---|---|
| ALEC estimate (2016) | Rank | Pew estimate (FY 2014) | ||
| California | $956.1 billion | 1 | California | $153 million |
| Illinois | $362.6 billion | 2 | New Jersey | $113.1 million |
| Texas | $360.4 billion | 3 | Illinois | $111.5 million |
| New York | $347.5 billion | 4 | Pennsylvania | $54.4 million |
| Ohio | $331.4 billion | 5 | Texas | $41.9 million |
| New Jersey | $235.5 billion | 6 | Ohio | $36.7 million |
|
Sources: American Legislative Exchange Council, "Unaccountable and Unaffordable 2016," October 2016 The Pew Charitable Trusts, "The State Pension Funding Gap: 2014," August 24, 2016 | ||||
| Unfunded liabilities per capita, FY 2015 | |
|---|---|
| Alaska | $42,950 |
| Ohio | $28,538 |
| Illinois | $28,200 |
| Connecticut | $27,653 |
| New Jersey | $26,288 |
|
Source: American Legislative Exchange Council, "Unaccountable and Unaffordable 2016," October 2016 | |
Pew also measures net amortization to evaluate the adequacy of a state's pension contribution policy to reduce pension debt. A state with a positive net amortization is more likely to decrease its pension debt. States with a higher negative net amortization are less likely to pay off pension debt. New Jersey had the second largest negative net amortization as a share of total salaries paid to current employees, after Kentucky.[6]
Conclusion
New Jersey Democrats in January introduced a bill to subsidize solar panel installations using revenue from taxes on electricity and natural gas. An editorial in the Press of Atlantic City expressed opposition to the bill and claimed, "N.J. politicians already have put a nation-leading tax burden on residents and a nation-leading government pension debt on future generations."[3]
The Tax Foundation ranked New Jersey as No. 1 in property taxes per capita (FY 2014), while its individual income tax per capita ranked seventh, and the state's general sales tax per capita ranked 16th.[4] New Jersey also ranked fifth for unfunded pension liabilities per capita at $26,288 (FY 2015).[5]
See also
- Fact check: Will CalPERS' new investment assumption lead to higher pension costs for school districts?
- Fact check: New Jersey's tax burden
- Pension health in New Jersey
- Public pensions in New Jersey
Sources and Notes
- ↑ New Jersey Legislature, "Assembly Telecommunications and Utilities Committee, Statement to Assembly, No. 441, with committee amendments," January 12, 2017
- ↑ Assembly Democrats, "Eustace, Benson and Zwicker Bill to Establish Solar Power Incentive Program Released by Assembly Panel," January 12, 2017
- ↑ 3.0 3.1 Press of Atlantic City, "Our view: Legislature should eliminate, not increase, regressive solar tax," February 24, 2017
- ↑ 4.0 4.1 4.2 4.3 4.4 4.5 4.6 Tax Foundation, "Facts & Figures 2017," accessed March 14, 2017
- ↑ 5.0 5.1 American Legislative Exchange Council, "Unaccountable and Unaffordable 2016," October 2016
- ↑ 6.0 6.1 6.2 The Pew Charitable Trusts, "The State Pension Funding Gap: 2014," August 24, 2016
- ↑ New Jersey Legislature, "A441, Establishes solar power incentive program," accessed March 14, 2017
- ↑ As proposed, the program would be limited to solar panel systems with an installed capacity equal to or less than 25 kilowatts for residential systems and 2 megawatts for non-residential systems. New Jersey Legislature, "Assembly Telecommunications and Utilities Committee, Statement to Assembly, No. 441, with committee amendments," January 12, 2017
- ↑ New Jersey Legislature, "Assembly, No. 441," accessed March 1, 2017
- ↑ New Jersey's Clean Energy Program, "Chapter 23," accessed March 8, 2017
- ↑ SBC rates ranged from $0.006225 per kilowatt-hour to $0.008386 per kilowatt-hour for electric customers and from $0.0352 per therm to $0.0499 per therm for gas customers. New Jersey Legislature, "Board of Public Utilities, FY2016-2017, Discussion Points," accessed March 14, 2017
- ↑ New Jersey Legislature, "Assembly, No. 4643," accessed March 8, 2017
- ↑ New Jersey Legislature, "A4643, Establishes solar power incentive program," accessed March 8, 2017
- ↑ State of New Jersey, "Remarks of Stefanie Brand, Director, Division of Rate Counsel, Regarding A441 (Establishes Solar Power Incentive Program), Presented at the Assembly Telecommunications and Utilities Committee Meeting on January 12, 2017," January 12, 2017
- ↑ U.S. Energy Information Administration, "New Jersey Profile Analysis," July 21, 2016
- ↑ New Jersey Business, "Christie Administration Reaches Significant Renewable Energy Milestone in 2016," January 18, 2017
- ↑ Governing, "State Tax Collection Data: Income, Sales, License, Other Taxes," accessed March 7, 2017
- ↑ The Tax Foundation Facts & Figures report defines "other taxes" as "excise taxes (such as those on alcohol, tobacco, motor vehicles, utilities, and licenses), severance taxes, stock transfer taxes, estate and gift taxes, and other miscellaneous taxes." Tax Foundation, "Facts & Figures 2017," accessed March 14, 2017
- ↑ When measuring state general tax collections per capita in FY 2015, Hawaii (1st), North Dakota (2nd), New Mexico (11th), and South Dakota (9th), are "not strictly comparable to other states" because they have "broad bases that include many services." If these states are excluded, New Jersey ranks 12th. Tax Foundation, "Facts & Figures 2017," accessed March 14, 2017
- ↑ Ballotpedia, "Public pensions in New Jersey," accessed March 2, 2017
- ↑ A 2.344 rate of return is a lower than most states use in their accounting procedures. According to ALEC, states overestimate their rate of return, and using a lower rate will "show how a more realistic valuation differs from overly optimistic assumptions regarding unfunded liabilities." American Legislative Exchange Council, "Unaccountable and Unaffordable 2016," October 2016
- ↑ The report measures pension liability based on data from March 2015 to March 2016. American Legislative Exchange Council, "Unaccountable and Unaffordable 2016," October 2016
- ↑ National Association of State Retirement Administrators, "NASRA Issue Brief: Public Pension Plan Investment Return Assumptions," February 2017
Launched in October 2015 and active through October 2018, Fact Check by Ballotpedia examined claims made by elected officials, political appointees, and political candidates at the federal, state, and local levels. We evaluated claims made by politicians of all backgrounds and affiliations, subjecting them to the same objective and neutral examination process. As of 2025, Ballotpedia staff periodically review these articles to revaluate and reaffirm our conclusions. Please email us with questions, comments, or concerns about these articles. To learn more about fact-checking, click here.
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