The elimination of the estate tax is at the forefront of tax policy in New Jersey. In his Jan. 12 State of the State address, Governor and presidential hopeful, Chris Christie, announced his priority to eliminate the estate tax in New Jersey. New Jersey is one of two states that have both an estate and inheritance tax. The dual system, coupled with the state’s low estate tax exclusion of $675,000, “makes New Jersey unfair and uncompetitive,” said Christie.
The estate tax influences people to leave the state and penalizes “middle class families who want to pass down the family home to the next generation,” Christie argued.
The elimination of the New Jersey estate tax has been on Governor Christie’s radar for quite some time. When Christie took office in 2010, his advisors recommended an estate tax appeal, according to Bloomberg Politics.
What’s at stake is the revenue raised by the combined inheritance transfer taxes which amounted to $793.5 million in the 2015 fiscal year. In his speech, Christie did not specifically provide a proposal on how to make up for the lost revenues. In 2015, in exchange for an increase in gas tax Christie mentioned possible cuts to the estate and inheritance tax, reported NorthJersey.com.
Opponents of eliminating the estate tax highlight the inequity of increasing a gas tax to offset it. Such measures “disproportionately hits the state’s poor and middle class” while benefiting New Jersey’s wealthy, said Gordon MacInnes, president of the New Jersey Policy Perspective. Only 4 percent of the 70,000 people that die in New Jersey every year are subject to the estate tax, argued the Star-Ledger Editorial Board. Additionally, “New Jersey is broke,” MacInnes said. The lost revenue when the state is in a fiscal crisis does not improve New Jersey’s current situation, the Star-Ledger Editorial Board further reasoned.
Nevertheless, the New Jersey legislature convened Jan. 12 and there are several measures to eliminate the estate tax, including 2016 N.J.S. 57 sponsored by Senator Raymond J. Lesniak (D) to eliminate the estate tax and raise the gross income tax rate on those earning more than $350,000. Lesniak is a proponent of using the “millionaire’s tax” to replace the estate tax and its associated revenue. Alternatively, 2016 N.J.S. 477, sponsored by state senators Steven V. Oroho (R) and Paul A. Sarlo (D), seeks to phase out the estate tax over a five-year period.
Only time will tell whether New Jersey’s estate state is eliminated. It’s an uphill battle for Christie given the state’s fiscal crisis and a division on where to recoup the lost revenue.
Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Should New Jersey eliminate its estate tax?
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By: Genie Nguyen
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Follow BBNA Tax on Twitter at: @BBNATax
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