New Jersey State Senator Jennifer Beck (R-Monmouth) voted today to pass a pair of tax-cut bills through the Senate Budget & Appropriations Committee.
Senator Beck voted for bipartisan S-1728 that would decrease the nation’s highest death tax — New Jersey’s estate tax — over a five-year period. She also supported bipartisan S-998, a retirement income tax cut for middle-class retirees.
“We all feel the pain as grandparents are forced to split from their children and grandchildren to protect what they worked their whole lives to earn and pass on,” Senator Beck said. “We feel the pain as employers, who once paid solid wages to our neighbors, are taxed out of New Jersey, and as our children graduate college in more affordable states, where they then get jobs, afford to buy properties and start families. Such devastating effects of high taxes hurt all of us who remain in New Jersey and it impacts future generations.”
According to the latest IRS data, New Jersey has lost a net of approximately $19 billion in taxable income between 2004 and 2014.
New Jersey’s estate tax impacts the inheritances of homes, properties and savings valued at more than $675,000, hurting many middle-class families in New Jersey, especially those in communities that have experienced rapid increases in real estate values over the years. That low tax threshold is no comparison to the federal estate tax levied on estates worth more than $5.43 million, or to the 36 U.S. states that do not have any estate tax. New Jersey is one of just two states with two different death taxes: the estate tax and the inheritance tax.
“Given the reservations of some of my Senate Democrat colleagues about S-1728, perhaps an outright estate tax elimination plan might not be our best chance to enact reform,” Beck added. “I think we might best serve the people of this state by instead bringing the estate tax in line with the federal level.”
S-998 would increase the exclusion rate on retirement income from the current rate of $10,000 for married filing separately, $15,000 for a single taxpayer, and $20,000 for a married couple to $50,000 for married filing separately, $75,000 for a single taxpayer, and $100,000 for married couples, all over three years. The higher exemptions on state taxes would cover pension income and 401(k), Individual Retirement Accounts and annuity withdrawals.
New Jersey’s neighboring states all have friendlier income tax policies for their retirees. Pennsylvania excludes private retirement income in addition to public pension income. New York excludes $40,000 of income for couples, twice as much as New Jersey.
Among the 41 states with a broad-based income tax, 36 offer exclusions for state or federal pension income or both, exclusions for retirement income, or tax credits targeted at the elderly. Ten states exclude all federal, state and local pension income from taxation, although some of them restrict the state and local exemption to pensions from within the state.
“New Jersey’s mass exodus translates to hundreds of millions in annual tax revenues flowing to other states from here, where we need those revenues to fund critical public services, such as health care, education and transportation infrastructure improvements and maintenance,” Beck said. “So many middle-class retirees in New Jersey have long struggled paying taxes to stay in state with families. This tax cut is a clear way to help. It’s not the total solution, but it’s something that the people of my district would support.”
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