This op-ed appeared in the April 9, 2016 edition of the Star-Ledger.
New Jerseyans are a proud bunch. We love to boast about all the things that make New Jersey a great place to live and raise a family. Great public schools, affordable state colleges, easy access to New York or Philadelphia – via an intricate network of roads, bridges, tunnels and public transit – these are the major selling points used by real estate agents and potential employers alike.
But to build a strong state economy that works for all New Jerseyans, we need to invest in these assets. And that investment isn’t possible without taxes.
New Jersey needs quality schools and preschools, affordable colleges and universities, and effective job-training so more people have the changing skills that can help businesses thrive and help hard-working people climb into the middle class. And businesses want and need safe and efficient roads and bridges, vibrant communities, and the other ingredients of a good quality of life. Only by investing in them can we build a strong economy and create jobs.
Yet these and other assets have been severely underfunded in the state budget year after year. Whether we’re looking at K-12 education, preschool expansion, investment in public transit and road maintenance, support for higher education, or vital services for families across the state, the pattern holds: investment has either declined, or failed to keep pace with rising costs.
So given this dire financial situation, and the state’s inability to invest in what works to grow the economy, you’d expect New Jersey policymakers to be eyeing new revenues to pay for these essential assets and services.
But instead, policymakers are pushing to cut $550 million from the general fund by eliminating the estate tax, a tax paid by just a handful of wealthy families every year. Eliminating this tax would undermine our ability to support the important services that businesses and families rely on every day.
Proponents of eliminating the estate tax root their argument in fuzzy math and the long-discredited trickle-down economic theory. They claim that by dropping a surcharge on inherited wealth, New Jersey’s economy will generate enough revenue to make up the difference. If that sounds too good to be true, that’s because it is.
Let’s back up a minute. When New Jerseyans die, the wealth they leave behind for others is potentially subject to two taxes – the estate tax and the inheritance tax. The estate tax was established back in 1934 at a time when wealth inequality was at its peak and progressive taxation was seen as a tool to give equal opportunity to all. The estate tax, which is levied on estates larger than $675,000, is the more progressive of the two taxes, meaning that it is a tax absolutely based on the ability to pay.
Today, we are again experiencing a level of wealth and income inequality not seen since the 1920s. Yet the policy in place that has traditionally fought dynastic wealth is being portrayed as a burden on the individual inheriting a fortune they did not earn. Anecdotes about “middle-class” families being hit by the estate class abound. Yet stories are stories, and facts are facts. About 3,000 to 4,000 estates pay this tax in any given year, which represents just 4 percent of all estates. Only 94 estates pay over 40 percent of the estate tax in a given year. These are the very largest estates with taxable assets of more than $5.3 million. Eliminating the estate tax would give each of these heirs a tax break averaging $1.3 million.
We should focus on making sure we have the resources we need to invest in what’s important. If we don’t, we will limit New Jersey’s opportunities and undermine our own prosperity.
Our country and our state became great because the people who came before us made the decision to invest in good schools, a strong transportation system and the other building blocks of economic growth. We owe it to our kids to continue that commitment to New Jersey’s prosperity by preserving the estate tax.