There has been a lot of talk lately about recent developments with New Jersey’s gas and estate taxes, and I wanted to pass on a quick update for the readers of the Jewish Link.
Let’s start with Estate Tax. As you’ve heard here before, New Jersey has the worst estate tax in the country. Better said, New Jersey’s estate tax exemption amount, i.e., $675,000, is the lowest in the country. That means if your estate (including life insurance) exceeds $675,000 then your family members could be on the hook to pay New Jersey estate tax. Not to mention New Jersey has inheritance tax as well.
But change could be on the way. In February, a state Senate committee passed a bill that would gradually eliminate the estate tax.
From an estate tax perspective, the bill calls for:
1. Raising the $675,000 exemption to $1,000,000 in 2017;
2. $2.5 million in 2018;
3. $3.5 million in 2019;
4. $5 million in 2020; and
5. Full repeal in 2021.
Sounds fantastic, right? The problem is that legislators believe the only way to recover the roughly $800 million shortfall from an estate tax change is to raise the gas tax 23 cents. The reason these legislators give is because of the connection to
the estate tax, which funds the Transportation Trust Fund (TTF), which is currently on course to run out of money. According to Governor Christie, the TTF already has run out of money.
This leads to the main question New Jersey legislators should be asking: Is the New Jersey Estate Tax causing residents to leave the state and, thus, lose income tax? According to the state’s 2015 debt report, the answer is a resounding “yes!”
Over two million people left the Garden State between 2005 and 2014, costing approximately $18 billion in income according to the New Jersey Business and Industry Association. In April, David Tepper, one of New Jersey’s most wealthy residents, announced he was moving to Florida, in big part because of its abusive tax laws.
There are two sides to every issue. Many legislators say that raising the estate tax at the cost of New Jersey gas prices would cause less wealthy residents to finance the inheritance of the middle and upper classes.
But the saga does not end there. In a deal struck at midnight on Tuesday, June 28, the NJ Assembly (with the approval of Governor Christie) decided to tie the estate tax to a decrease to the sales tax (from 7 to 6 percent) by 2018. The Assembly version would ditch the estate tax exemption increase completely. Fortunately for my clients, the Senate was not happy with the deal and did not sign the Assembly version into law.
Which is why, as of this writing, there has been no increase in New Jersey’s gas or estate tax. Governor Christie has already shut down hundreds of road projects because of the TTF shortfall. The issue seems to have stalled in the legislature. Until our legislators can agree on whether or not to raise the estate tax exemption or sales tax we can still pay some of the lowest prices for gas in the country. This the first time I am actually glad our government is dysfunctional.
Alec Borenstein, Esq., an estate-planning attorney, is a Teaneck resident with offices in Springfield and Brooklyn. His firm’s website is www.bmcestateplanning.com. If you’d like a free estate-planning consultation in the comfort of your own home or office, please email [email protected].