Sen. Beck Backs New Plan to Triple Estate-Tax Threshold to $2.5 Million
Raising limit would exempt about 90 percent of those now hit by tax, still preserve some revenue for various programs
- Credit: Martin Griff
A key Republican lawmaker has broken ranks with Gov. Chris Christie on repealing New Jersey’s estate tax, offering a compromise proposal that would keep the tax in place but significantly reduce how many people are hit by it.
The new idea being floated by Sen. Jennifer Beck (R-Monmouth) comes as Republicans and many Democrats have been backing a bill that would phase out over several years the tax that New Jersey levies on the estates of those who die here.
But instead of getting rid of the estate tax, Beck has proposed more than tripling how much can be exempted from the tax before it is triggered.
What remains to be seen now is if Democratic legislative leaders and Christie himself will embrace her idea as talks unfold over the next few weeks on a host of proposed state tax-policy changes. These include a possible increase in New Jersey’s gas tax to replenish the state’s Transportation Trust Fund.
Democrats in the Senate have offered to phase out the estate tax in exchange for a gas-tax deal with Christie and other Republicans that would renew the transportation fund, which is on course tothis summer. But so far, a deal has yet to be reached.
Right now, New Jersey is one of only two states 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. New Jersey is also one of only 15 states to levy an estate tax, and the state’s $675,000 exemption is the lowest in the country.
Christie, a second-term Republican, called earlier this year for the estate tax to besaying it will help prevent wealthy individuals and business owners from fleeing New Jersey for lower-tax states.
He’s also pointed to the estate tax frequently when asked by reporters in recent weeks about Democratic legislative leaders’ calls for hiking the gas tax, saying lawmakers should be looking at overall “tax fairness.” The 14.5-cent gas tax is a primary source of revenue for the transportation fund, which pays for more than $3 billion in annual road, bridge, and rail-network improvements, counting federal matching dollars.
Bipartisan legislation that would phase out the estate tax over a period of five yearsin early March. But Assembly Speaker Vince Prieto (D-Hudson) said yesterday that he would only be willing to look at such a change if it was included in a much bigger deal to renew the transportation fund.
Other tax-policy changes that could be brought into the deal include creating a state income tax exemption for charitable contributions and increasing existing state income tax exemptions for sources of retirement income like pensions and 401(k) plans, he said.
“It needs to be a discussion, that we could come to a compromise,” Prieto said during a news conference held in the State House yesterday.
Earlier, advocates for labor, small businesses, the environment, and others who oppose an outright repeal of the estate tax raised concerns about how much revenue the state would lose for safety-net programs if it were to be abolished. Analysts from the nonpartisan Office of Legislative Services have estimated the tax generated $319 million in revenue during the 2014 fiscal year.
“Our state is at a crucial decision point,” said Serena Rice, executive director of the Anti-Poverty Network of New Jersey.
But also yesterday, Beck offered up her own idea, proposing that New Jersey should consider lifting the estate tax exemption up to $2.5 million instead of getting rid of the tax altogether like Christie has called for.
Such a change would mean nearly 90 percent of those currently subject to the estate tax would no longer have to pay it, including many farmers and small-business owners, she said. Lifting the threshold over time up to a $2.5 million exemption would also bring New Jersey more in line with neighboring states like New York and Connecticut, which have thresholds of $3.125 million and $2 million, respectively.
“Increasing our exemption to $2.5 million would have the same effect as eliminating the estate tax completely for most people,” Beck said.
The data collected by the nonpartisan legislative analysts also suggests that the hit on state revenues would be much less than an outright repeal. Nearly $200 million came in from estates worth $2.5 million or more during the 2014 fiscal year, according to the OLS research.
Christie has previouslythat Beck came up with for renewing the Transportation Trust Fund that doesn’t rely on hiking the gas tax. Instead, she would combine expected growth in other state-tax collections with new revenue from proposed higher fines on things like drunken driving and texting while driving to extend the fund for seven years.
Christie’s office did not respond yesterday when asked to comment on Beck’s new plan for lifting the estate-tax exemption.
Reached by phone, Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-Bergen) said he could potentially support Beck’s proposal as part of a broader deal on transportation funding, similar to what Prieto has called for. But Sarlo, who is a sponsor of the bipartisan legislation seeking to phase out the estate tax over five years, also cast doubt on Beck’s proposal winning approval from Christie.
“It’s a nice idea, but I don’t believe the governor will accept it,” he said.
The New Jersey Business & Industry Association -- which has been one of the most vocal groups in support of getting rid of the estate tax -- issued a statement yesterday that promised the group would “take a look at any legislation that seeks to meet the objective of providing significant estate-tax relief.”
Officials New Jersey Policy Perspective, a liberal think tank based in Trenton have been among those most critical of eliminating the estate tax. Jon Whiten, the organization’s deputy director, yesterday gave Beck credit for searching for a compromise position, but he also questioned whether the state could afford to lift the exemption up to $2.5 million. "At a time when New Jersey can't meet its obligations; serve its residents who are struggling to get by; or adequately invest in its schools, colleges, or roads and transportation systems, another tax cut of more than $100 million for the well-off fails the fairness test" Whiten said.