This bill proposes a significant overhaul of New Jersey's gross income tax system, transitioning from a progressive tax structure to a flat tax rate. Starting from taxable years beginning on or after January 1, 2026, the bill establishes a flat tax rate of 5.9 percent on all taxable income exceeding $37,500 for unmarried individuals, married individuals filing separately, or estates and trusts, and $75,000 for married individuals filing jointly, heads of household, or surviving spouses. Taxpayers earning below these thresholds will be exempt from the gross income tax.

The current law employs a progressive tax system with rates ranging from 1.4 to 10.75 percent, where tax liability is determined by filing status and income brackets. The bill also amends the minimum taxable income thresholds, raising them to $37,500 for certain filers and $75,000 for others, thereby eliminating tax obligations for those with incomes below these amounts. This change aims to simplify the tax process and provide clarity for taxpayers, moving away from the complexity of multiple tax brackets.