FOR IMMEDIATE RELEASE: JANUARY 19, 2016
Contact: Jon Whiten, NJPP: email@example.com | 609-393-1145 ext. 15
Cutting this tax on inherited wealth would benefit the wealthiest while taking $300 million a year away crucial services
Eliminating New Jersey’s estate tax, as Gov. Christie proposed in his State of the State address last week, would deprive the state of resources needed to promote widespread prosperity while benefiting the state’s highest net-worth households the most, advocates, policy experts and small business owners said Tuesday.
The governor pitched his call to kill this tax on inherited wealth as something that would boost New Jersey’s shrinking middle class. But that claim isn’t borne out by the facts, according to a new report released today by New Jersey Policy Perspective (NJPP).
In fact, the estate tax only affects the wealthiest 4 percent of New Jersey households, with fewer than 3,000 families a year owing this tax. And since the tax is highly progressive, taking 41 percent of its collections from the 94 estates that each have taxable assets of more than $5.34 million, eliminating it would deliver an enormous tax cut to the New Jersey families that need it least. These 94 estates would get an average tax break of $1.3 million – a reduction 58 times larger than the break for the families with taxable assets between $675,000 and $1 million.
“This is the worst time for the governor’s proposal,” said Gordon MacInnes, President of NJPP. “The state is effectively broke and he proposes that the very wealthiest families be handed a huge tax break, while the 99 percent of the rest of us try to get along in high-cost New Jersey.”
“Six years of tax breaks for the wealthy and corporations have already thrown our economy out of whack and left the state unable to meet our responsibilities or basic needs,” added Rob Duffey, Policy and Communications Director of New Jersey Working Families. “New Jersey’s wealthy don’t need another tax cut, and New Jersey’s working families certainly can’t afford to once again pick up the tab through even higher property taxes, transit fares and tuition.”
Eliminating the estate tax, and the $300 million in tax revenue it collects, would also hamper the state’s ability to invest in the assets that make New Jersey a great place to do business, small business owners said.
“I choose to work and live in New Jersey because of the good access to services, an educated workforce and thriving communities – all things that the estate tax helps pay for,” said Kelly Conklin, owner of Foley Waite Associates in Kenilworth and a Steering Committee Member of the New Jersey Main Street Alliance. “And we shouldn’t kid ourselves that it’s a tax on small business. My woodworking company has enjoyed a lot of success over the years selling high-end products to customers throughout the region. But the estate tax won’t affect me. Neither will it affect your dry cleaner, barber, child care provider, mechanic, nor the carpenter who built your new kitchen – none of these small business owners are likely pay a dime in estate taxes.”
“What our members need are more customers with more money in their pockets,” added Jerome Montes, business representative of the New Jersey Main Street Alliance, a network of 1,400 independent businesses across the state. “Repealing the estate tax won’t help with that, as it benefits only the very wealthiest of New Jerseyans. Giving them a tax break isn’t going to make them buy more pizzas or chairs or sign their children up for more soccer lessons. And it takes money away from the communities that our small business owners depend on.”
And at a time when more and more New Jersey families are living in poverty – a measure that’s seen an 18 percent increase in the past five years – eliminating the estate tax would also have disastrous ripple effects that would devastate low- and moderate-income people that rely on the state for vital services.
“This benefit for the few has to be seen in the context of what it will cost the rest of us,” said Serena Rice, Executive Director of the Anti-Poverty Network of New Jersey. “In a significant way it will cost us our ability to respond to the very real and pressing needs of our neighbors, and it will cost us our ability to say that we really care.”
“Any assertion that eliminating this tax on inherited wealth will primarily benefit middle class families is dishonest at best. Instead, it should be seen for what it is: another giveaway to the super rich,” added Ann Vardeman, Program Director at New Jersey Citizen Action. “New Jersey families need investments in our roads, schools and safety net programs in order to build a strong economy. Giving away $300 million every year to the inheritors of the 3,000 wealthiest estates in New Jersey will make it nearly impossible for future legislatures to meet our fiscal obligations without more devastating cuts to our schools, health care and safety net programs upon which working families rely.”
Business lobbyists and proponents of eliminating this tax have been pounding the drum about the estate tax supposedly leading to a mass “exodus” of wealth and income from New Jersey, there’s not a single shred of credible evidence to support these contentions.
These folks throw around numbers like $12 billion in net income lost over a decade, which sure sounds like a lot of money but is in fact only about half of 1 percent of the total amount of income generated and earned in New Jersey. For example, from 2012 to 2013, New Jersey posted a net loss of $1.7 billion in income that “migrated,” but the total amount of income in the state that year was $319 billion.
And what’s more, about 3 in 4 tax filers whose “migrate” out of New Jersey in a year have household incomes of less than $75,000, and just 6 percent had incomes over $200,000 – a pattern that holds relatively steady across all age groups, even older folks and retirees.
“The bottom line is that the overwhelming majority of the people taking their income out of New Jersey are not subject to the estate tax,” said Jon Whiten, Deputy Director at NJPP and author of the report. “Folks who say they’re concerned about New Jersey’s economy, but focus their attention on a tiny sliver of income leaving the state, rather than how to maintain and grow the economic activity that’s already here, are missing the forest for the trees.”