On June 30, Governor Corzine signed into law the 2010 state budget bill. Included in the bill are increases in the personal income tax rates for New Jersey taxpayers for one year, retroactive to January 1, 2009.
For taxpayers with taxable income in excess of $400,000 but less than $500,000, the tax rate increases from 6.37% to 8%, for taxpayers with taxable income between $500,000 and $1 million, the tax rate increases from 8.97% to 10.25%, and for taxpayers with taxable income in excess of $1 million, the tax rate increases from 8.97% to 10.75%.

A New Jersey taxpayer with taxable income of $1.1 million in 2009 now will pay New Jersey income tax equal to $95,480. Prior to the change in the rates, the same taxpayer would have paid $81,627.50. In this example, the percentage change in the tax rate is equal to 1.26%.

Earlier this year, New York also raised its income tax rates effective through December 31, 2011. For taxpayers with taxable income in excess of $300,000 but less than $500,000, the tax rate increases from 6.85% to 7.85% and for taxpayers with taxable income in excess of $500,000, the tax rate increases from 6.85% to 8.97%.

For those taxpayers who may have the ability to effectively change their domicile to other states with less of an income tax burden (i.e. Florida with no state income tax), now may be the time to seriously consider the move.