I was born and raised in New Jersey and it is where I opened my first practice. I still have an office in New Jersey, so any time a local story turns up that could affect my New Jersey clients, I try to give my thoughts on the matter.
New Jersey, from a tax perspective, has been known for two things: high estate and inheritance tax rates, and low gas tax rates. New Jersey is one of two states to impose both an estate tax and inheritance tax on its residents (also known as the “death” tax). Many residents and businesses have located elsewhere since New Jersey only allows an estate exclusion of $675,000 (vs. $5.4 million federal exclusion). This has been an issue for a number of years and everybody in New Jersey knows it. The only problem? It has been generating money for the state and no one in Trenton wants to stick their neck out and try to increase the exclusion.
In recent months, New Jersey, as well as the federal government, has seriously considered raising its gas tax. The state and the federal government are facing similar budget problems. New Jersey’s transportation fund will become insolvent in less than six months. This fund is responsible for maintaining current road conditions, as well as new infrastructure projects state-wide. If the fund becomes insolvent, New Jersey would also lose more than $1.6 billion in federal transportation funds.
These two issues have run their separate course, but are now meeting head-on. The state is working on a compromise that would decrease the “death” tax imposed on residents and increase the state gas tax charged at the pump. As a life-long New Jersey resident, I have to say I think this is a good idea. I have always been opposed to the estate “penalty” paid by many of my clients. Although I have enjoyed lower-average-gas prices my entire life, I would gladly support this compromise in the long-term. The “death” tax specifically hinders those living in New Jersey, whereas the gas tax would generate additional income from both residents and out-of-state residents. Remember, New Jersey is a haven for tourism in the summer, so a good percentage of this tax will be paid by others. I am interested to see how this compromise develops…