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Is New Jersey’s Estate Tax Prompting Retiring Residents to seek Greener Pastures?

Monday, April 4, 2016   (0 Comments)
Share | 4/4/2016

After trying for years with no luck, Republicans and business-lobbying groups this year have successfully seized on New Jersey’s standing as one of the only 15 states in the country to still levy an estate tax to generate momentum for repeal. A bill that would phase out New Jersey’s estate tax over five years passed a key Senate committee with bipartisan support several weeks ago. And Gov. Chris Christie is also on board, calling in January for this year to be the year that New Jersey’s estate tax is finally abolished. Evan as lawmakers are pursuing the full phase-out, there seems to be some room for compromise among the interest groups seeking repeal and those wishing to maintain the status quo. They still disagree, however, on where a new threshold should fall. New Jersey is one of the only two states in the country to levy both a tax on someone’s estate when they die and a tax on an inheritance that is left to someone other than a direct relative or charity. The state’s $675,000 estate-tax exemption is well below those levied in nearby states, which has helped to put New Jersey lawmakers’ attention primarily on the estate tax instead of the inheritance tax.

Reason why people leave NJ?

Leading the charge along with Christie for repeal of the estate tax this year has been the New Jersey Business & Industry Association. The organization released a study of outmigration trends earlier this year that made the case that New Jersey’s estate and inheritance taxes are motivating people in their later years to leave the state. They’re going not only to states with warmer climates, but also to those with less aggressive tax policies, the study said. Christie cited NJBIA’s research during his State of the State address in January when he called for the Legislature to work with him to repeal the estate tax. Several weeks later, the bipartisan bill that would phase out the estate tax out by 2021 cleared the Senate Budget and Appropriations Committee.

Mostly benefits the wealthy

Sheila Reynertson, a senior policy analyst at the think tank, argues a repeal of the estate tax would mostly benefit the state’s wealthiest residents. But Reynertson said during the event last week that she also sees some merit in raising New Jersey’s estate-tax exemption a little higher, possibly to $1 million. Research released last year by the nonpartisan New Jersey Office of Legislative Services sheds some light on how lifting the threshold to either $1 million or to over $5 million would impact both the state budget and those who are subject to the estate tax. OLS studied data from the 2013 fiscal year, when 3,266 estates were taxed, generating roughly $325 million in revenue for the state. At the lowest end of the scale, there were 1,298 estates worth between $675,000 and $1 million that were taxed by the state that year. They produced $28.2 million in revenue. But the state generated $126 million from just 109 estates that were worth $5 million or more, according to OLS.

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