New Jersey’s pathetically bad tax structure is back in the news, Save Jerseyans, after reports began circulating of our “jock tax” that would likely rob Peyton Manning of most – if not all – of his Super Bowl earnings from this upcoming Sunday’ game.
Living here is bad enough.
Dying here? Fuhgeddaboudit!
Two New Jersey Senators are doing their best to undo the damage.
Only sixteen U.S. states still have an estate tax; only two boast both an estate tax AND a separate inheritance tax. Can you guess one of the two? Yup; New Jersey!
Our Garden State has the lowest estate tax exemption in America ($675,000 per person) and a top rate of 16%. Any inheritance $500 or higher is taxed at a rate of 15% up until $700,000; then the rate jumps to 16%. The only good news? The estate only has to pay the higher of the two taxes. A small favor! New Jersey also lacks a “portability” option which would allow surviving spouses to co-opt the deceases spouse’s exemption without a so-called credit shelter trust.
Sens. Tom Kean, Jr. (R-Union) and Anthony Bucco (R-Morris) reintroduced S1021 on Wednesday, legislation which would repeal New Jersey’s estate tax altogether.
Click here to read the text; this excerpt from the bill statement is particularly illustrative of the need to update a badly-outdated New Jersey approach to death, assets and taxes, and bring New Jersey into conformity with trends at the state and federal levels:
Currently, New Jersey imposes an estate tax based on a credit historically allowed by federal law against the federal estate tax for the payment of inheritance taxes or other legacy taxes imposed by the states. However, under federal tax code changes enacted in 2001, the federal credit by which New Jersey’s estate tax is calculated was phased-out over a four year period, with a full repeal of the federal credit taking effect in 2005. Thus, but for the enactment of P.L. 2002, c.31 (C.54:38-1et seq.), which “decoupled” the New Jersey estate tax from the 2001 federal tax law changes, New Jersey’s estate tax would have been completely eliminated in 2005.
While prior to 2001, all states imposed an estate tax which allowed the states to “pick up” a share of federal estate tax revenues through the federal credit mechanism, only 15 states, including New Jersey, elected to “decouple” from the federal estate tax in 2001, effectively negating the intent of the U.S. Congress to repeal the “pick up” tax. Moreover, only two states, New Jersey and Maryland, currently levy an estate tax similar to the one in effect prior to 2001 while also separately imposing a State inheritance tax. With this legislation, New Jersey would join the majority of states which have chosen to follow the changes implemented at the federal level and eliminate an estate tax based on the federally repealed credit.
Competition is key, Save Jerseyans. Trenton can raise our taxes but it can’t keep us from moving. Changes are necessary NOW before everyone who CAN pay taxes trades turnpikes for palm trees.