These remarks on S-1728 were delivered to the Senate Budget Committee this afternoon.
Good afternoon, Mr. Chairman and Senators. Thank you for the opportunity to speak here today.
Eliminating the estate tax means protecting inherited wealth at the expense of addressing rising poverty rates among children, a dismal share of affordable housing and higher education that is increasingly out of reach for New Jersey’s middle-class families. It means pushing aside expansion of universal pre-K education and modest but no less important investments like reproductive health care for low-income women and lead removal.
We are talking about a tax that affects an average of just 3,000 estates a year – the 4 percent of estates that have the most wealth to pass down. And on the other side of the ledger, we’re talking about a tax that contributes $300 million to the state’s priorities – and likely upwards of $400 million in the 2017 budget recently proposed by the governor.
That revenue is absolutely vital to making New Jersey a great place for everyone who lives and works here, whether or not they happen to be among the lucky 4 percent that actually pay this tax.
This bill is being proposed at a time when we have an extensive list of underfunded budget priorities. The proposed pension payment for 2017 is half of what is needed to keep the fund healthy, the school funding formula has been underfunded cumulatively by $7 billion, state funding for higher education has dropped 22 percent, $1 billion of the Clean Energy Fund has been siphoned off to plug budget holes. We apparently can’t even afford $10 million to prevent kids from being poisoned by lead. It is crystal clear that eliminating the estate tax would make this situation worse.
Despite the well-worn myth, this is not a tax that hits the average New Jersey family.
The median net worth of New Jersey households is $117,000, according to the Corporation for Enterprise Development. The threshold for filing an estate tax return is five times that amount. Even households at the top – those with the highest 20 percent of assets – have an average net worth of $366,000, still far below $675,000 – the level at which the estate tax kicks in.
What’s worse, this proposal is being considered in the midst of a modern-day Gilded Age. Here in New Jersey, wealth has become increasingly concentrated in very few hands. The wealthiest 1 percent holds 21 percent of the state’s income – a level of inequality not seen since the 1920s.
Yes, New Jersey’s estate tax is an outlier with its low threshold of $675,000 and has been for many years. Yet we consistently are one of the three wealthiest states in the country, we are adding – not losing – wealthy families, and the revenue collected from this and the inheritance tax is growing, not shrinking. In fact, it has grown by 44 percent in the last 13 years. And the 2017 budget just proposed expects to collect the highest amount ever from these taxes, at $848 million.
We are not losing wealthy families over this tax. In fact, we are creating and attracting new wealthy families who love living here. They appreciate our excellent schools, our open spaces, our walkable villages, our convenient transit system into two of the finest cities on the East Coast. But if we don’t priorities investments into these impressive assets, we won’t have much to boast about anymore.
Losing the funds from this tax would seriously threaten investments in the assets that build a strong state economy for all of us, while benefitting very few.