The Steve Lonegan flat tax elimates the progressive tax scheme listed as one of the worst in the nation.  Under the current system high wage earners are fleeing the state either by moving or changing their primary residence to states such as Pennsylvania with a 3.07% flat tax or Florida with no income tax.  This will also reenergize the movement of high earners from New York to New Jersey searching for a tax haven. 

The progressive system is unsustainable because, as the high wage earners flee, rates must continually increase to make up for lost revenue.  The Lonegan plan includes specific plans to cut several State Departments to reduce spending to sustain the tax cuts. 

Lonegan’s Flat Tax cuts rates on singles earning over $35,000 and couples earning over $70,000.  These cuts are critical in promoting that “extra effort” that enhances the economy while the progressive system dters “extra effort.”

Current plans under Jon Corzine are to raise the top rate over 10% because of the reduced revenue.  Chris Cristie claims to want to cut taxes but has no concurrent plan to cut spending making the claims unfeasible.

The median household income for NJ is about $67,000 and married taxpayers would pay $1222 now, $1943 the first year of the plan and $1407 in year 3 of the plan.   Some household will see a small increase in income tax which is more than offset by reductions in property tax as the relief funds are redistributed.  The system also has the added benefit of reducing tax preparation and accounting costs. 

The flat tax is a fair system that treats all taxpayers equally.  This system also gives taxpayers an equal stake in government spending … when spending goes up everyone’s taxes are increased by the same percentage.  The system also does not provide incentives for low earners to move from other states into NJ.

The current NJ income tax rates are:

Taxable Income          Single                   Income                        Married
$0 - $20,000              1.4%                     $0 - 20,000                  1.4%
$20,000 - $35,000     1.75%                   $20,000 - $50,000       1.75% 
$35,000 - $40,000     3.5%                     $50,000 - $70,000        2.45%
$40,000 - $75,000     5.525%                 $70,000 - $80,000        3.5%
$75,000 - $500,000   6.37%                   $80,000 - $150,000      5.525%
$500,000+                  8.97%                   $150,000 - $500,000    6.37%
                                                               $500,000+                     8.97%

Comparison of taxes under the current and Lonegan flat tax proposal for Single (S) and Married (M) taxpayers:

Taxable Income - Tax (S) - Tax (M) - 2.9% Flat Tax - 2.1% Flat Tax
$10,000                 $140       $140           $290                 $210
$20,000                 $280       $280           $580                 $420
$30,000                 $455       $455           $870                 $630
$40,000                 $718       $630           $1160               $840
$50,000                 $1270     $805           $1450               $1050
$60,000                 $1823     $1050         $1740               $1260
$75,000                 $2652     $1470         $2175               $1575
$100,000               $4244     $2750         $2900              $2100
$200,000               $10,614  $8698         $5800              $4200
$500,000               $29,724  $27,808      $14,500           $10,500