Think tank targets 401(k) exemptions

New Jersey Policy Perspective, a liberal think tank that believes New Jersey's problems can best be solved by throwing lots of money at them, has come out with a new report suggesting the Legislature extract more money from the income tax - about $1 billion worth. About half of that would come from eliminating the tax exemption for 401(k) contributions.

In June, it recommended extending the sales tax to goods and services that were exempt. It provided a list of items that could generate another $5. 6 billion. The Legislature extended the sales tax to some items in July, in addition to raising the tax from 6 to 7 cents.

NJPP's latest report also suggests increasing the lowest tax bracket to 1.75 percent and adding a new bracket of 7.67 percent on income between $250,000 and $500,000, which would bring in more than $400 million in new revenue and "increase tax equity among higher income earners."

NJPP also recommends raising the tax threshold for married couples filing joint returns to $30,000 from $20,000 and for singles to $15,000 from $10,000, which would cost taxpayers about $200 million.

The report advises against giving local governments the authority to levy income taxes, but is silent on whether towns and counties should be allowed to levy sales taxes, as Gov. Corzine has suggested as an option for the Legislature to consider.

To read the full report, "If It Ain't Broke...New Jersey's Income Tax Makes Dollars and Sense," go to: http://www.njpp.org/rpt_aintbroke.html