New Jersey Governor Chris Christie’s proposal to cut  income taxes by ten percent will benefit the rich and not the middle class.

Christie’s plan would benefit taxpayers who pay a significantly higher income tax rate under the state’s current tax system.  But the plan doesn’t help middle-class who are struggling more with the property tax rate.

“We all want to cut taxes, but we want to cut the right taxes in ways that help those most in need and that provides the most benefit to the economy,” said Senator Paul Sarlo (D-Bergen), chairman of the Senate Budget and Appropriations Committee, which conducted the first of many expected hearings Monday on the tax cut proposal.

Republicans argue that the Democrats are rebuking the proposal too quickly.

“Democrats cannot have a knee-jerk reaction,” State Sen. Kevin O’Toole (R-Essex) said. “History shows that it will create more income tax revenue, attract jobs and more opportunities.”

O’Toole noted that when former Gov. Christine Todd Whitman, also a Republican, cut income taxes in the 1990s, overall income tax revenue increased as the economy expanded, incomes rose and jobs were created.

Under the proposal, a family earning $50,000 a year would save $80.50, and those making $100,000 would save $275, according to David Rosen, budget and finance officer with OLS. Families who make $1 million would save $7,265, Rosen said.

The Office of Legislative Services also did an analysis of the taxes paid in 2004 and found that NJ taxpayers who made less than $200,000 paid a greater share of their income toward property taxes than income taxes.  For example, a family that makes $80,000 paid about 6 percent of its gross income for property taxes and about 1.6 for income taxes.

Based on the analysis, it seems unlikely that Cristie’s income tax cut proposal will win approval. Expect the Democrats to offer a counter proposal that would emphasize property tax cuts for the middle class.

The Senate Republicans and Democrats came together today in offering tax relief to Americans looking to buy homes in 2009. If approved, the Senate proposal would give a tax credit up to $15,000 for anyone buying a house.

How is this good for the American home buyer? Currently, there is a $7,500 tax credit for home purchases – but the money must be repaid.

The proposal was pushed by Republicans who favored targeted tax credits over no-strings rebates. The Senate measure, if it becomes law, would provide a credit of 10% of the home purchase price, up to a maximum credit of $15,000.

Real estate industry groups have backed such a credit as a way to spur demand for homes.

The reason for the proposal is obvious, to stimulate the home housing market which would then help generate new jobs and trigger the economy.

The homebuyer tax credit offered by GOP Sen. Johnny Isakson would apply to any home purchased as a main residence and would cost taxpayers $19 billion. Senators approved it by a voice vote, adding the idea to President Barack Obama’s economic recovery bill.

In these troubling times we need all the help we can get.  But did you know the IRS may be able to help you during these economically challenging times?  Here are 10 things to know”. 

1. Recovery Rebate Credit: If you didn’t get an economic stimulus payment this past summer and didn’t file a tax return, you may be eligible for the Recovery Rebate Credit . See IRS.gov for details.

2. The Alternative Minimum Tax has been ‘PATCHED”. For 2008, the exemption amounts are $69,950 for married couples filing jointly and $46,200 for single individuals . More information is available at IRS.gov.

3. Cancellation of Debt income: If you have had or will have a home foreclosure, check out the tax rules at IRS.gov. Things may not be as bad as you think.

4. Commuting: If you ride your bike (bicycle) to work in 2009, it could be worth $20 a month, tax free from your employer. See IRS.gov. for more.

5. Deductions: The new additional standard deduction for non-itemizers can be as much as $500 or $1,000 if you are married, filing a joint return. Go to IRS.gov for details.

6. Election to Deduct Sate and Local General Sales Tax: You have an option when itemizing. Claim either State and local general sales taxes paid or state and local income taxes paid, but not both. IRS.gov has more.

7. Mileage: The standard mileage rate is changing from 59.5 to 55 cents per business mile as of Jan. 1, 2009. More information at IRS.gov.

8. Homebuyer Credit: The new “First Time Home Buyers Credit” is for a home purchased after April 8th, 2008 and before July 1st, 2009 and could be worth as much as $7,500. Do you qualify? See IRS.gov.

9. Residential Energy Property Credit: This credit has been re-instated for 2009 and is worth up $500 for up-grading your home with certain energy efficient items. See if you qualify at IRS.gov

10. Plug-in Electric Drive Motor Vehicle Credit: Buy a new plug-in electric car and get a credit of $2,500 or more. See IRS.gov about this today.
And one more for “tax credit”:

11. Record Keeping: Make sure you don’t omit or forget an item so you pay only the correct amount of tax – no more, no less. See IRS.gov for more details

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