New Jersey Estate Tax: Status
New Jersey Estate Tax: Status
New Jersey and Maryland have both an estate tax and an inheritance tax. Unlike federal estate tax rules, a surviving spouse in New Jersey can not inherit the deceased spouse’s unused estate tax exemption, which means each spouse’s estate is taxed on every dollar over $ 675,000. New Jersey’s $ 675,000 estate tax threshold is the lowest in the nation, falling well below the current $ 5.45 million federal exemption.
Critics of the estate tax say It is one of many tax burdens in New Jersey that drive people out of the state. Many lawmakers agree that although the estate tax is a problem, they have not agreed on the correction. State Assembly Speaker Prieto spoke out against the only bill to come up for a committee vote, a bipartisan proposal that would increase the estate tax exclusion and then phase it out over five years. However, Sen. Beck suggested that raising the threshold to $ 2.5 million would be a better long-term solution.
Those in Trenton who want to retain the estate tax say the state simply can not afford to eliminate it. New Jersey’s inheritance and estate taxes combined are expected to generate $828.5 million in 2016, making it the fourth-largest source of state tax revenue.
State Assembly Speaker Prieto said that while he would be open to increasing the threshold on the estate tax, he did not want to eliminate it because that would leave a $ 400 million deficit in the state budget.
The only estate tax proposal that has moved beyond committee seeks to repeal the tax entirely. The bill increases the tax exclusion to $ 1,000,000 in 2017; then $ 2,500,000 in 2018; and $ 3,500,000 in 2019; and finally $ 5,000,000 in 2020. Thereafter, in 2021 the estate tax would be eliminated. However, it has been calculated that the annual estate tax revenue would be reduced by $ 120 million in 2018;$ 245 million in 2019; $ 300 million in 2020.
Finally, others are blaming the estate tax for the loss of more than 2 million people or $ 18.4 billion in lost state gross income from 2004 through 2013.
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Steven W. Tarta, Esq. brings more than 45 years of professional experience to his practice, with a sophisticated focus on Estate Tax Planning, Living Trusts and Elder Law.