Topic Category: Tax and Budget

The Senate’s Tax Cut Plan, by the Numbers

Posted on by Jon Whiten

The current transportation funding proposal championed by New Jersey’s legislative leadership, and advanced out of the Senate Budget Committee last week, includes a much-needed increase in New Jersey’s fuel taxes, which is crucial to ensuring New Jersey’s economic future. But the good news ends there, as the flip side of the coin is a big package of tax cuts that will disproportionately benefit the state’s wealthiest residents and heirs while making it all that much harder for New Jersey to pay for essential services and targeted investments to grow the economy in the future.

The tax cuts are weighted towards those who have little need for relief – and those families stand to receive much larger breaks, dollar for dollar. So while eliminating the estate tax will deliver an average tax cut of more than $100,000 to a few thousand heirs (and an average tax cut of more than $1 million to those inheriting the very largest estates), boosting the Earned Income Tax Credit will give nearly 600,000 striving and struggling working families a credit of about $250 each.

$896 million: The total amount of lost revenue from the five tax cuts and credits

62%: The share of that amount that will be split between about 4,000 heirs of New Jersey’s largest estates, via the total elimination of the estate tax ($552 million) = an average tax cut of about $138,000.

Of this:

  • Approximately 72% will go to a few hundred (about 22%) of the heirs who currently pay the tax; those who are inheriting the largest multi-million-dollar estates
  • The rest (just 28%) will go to 78% of the heirs who currently pay the tax; those who are inheriting smaller – but still sizable – estates valued between $675,000 and $2 million
  • The 96% of estates left by deceased New Jerseyans that are worth less than $675,000 will continue to be untaxed

18%: The share of that amount that will be split between about 200,000 New Jersey households with annual retirement income between $10,000 and $100,000, via a 400 percent expansion of an existing tax exemption on retirement income = an average tax cut of approximately $820

Of this:

  • About 84% will go to the top 40% of all New Jersey households (those with annual incomes over $79,000).
  • About 16% will go to households in the middle (with incomes between $49,000 and $79,000)
  • Just 1% will go to the bottom 40% of all New Jersey households (those with incomes below $49,000), because these taxpayers are already largely covered under the current exemption.  

15%: The share of that amount that will be split between nearly 600,000 working families who are struggling to get by in high-cost New Jersey, via the increase in the state Earned Income Tax Credit to 40% of the federal level = an average tax cut of $250

Latest Transportation Funding Plan: Still Reckless & Still Unfair

Posted on by Gordon MacInnes

There is no doubt that there is an urgent need to address New Jersey’s transportation-funding crisis, put money into the Transportation Trust Fund and get people back to work across the state.

But tying any plan to do so to an outright elimination of the state’s estate tax is financially reckless and endangers the state’s future while delivering big financial rewards to the fortunate few who will no longer have to pay New Jersey taxes on multi-million-dollar estates they inherit.

If lawmakers must address New Jersey’s estate tax, they’d be better off taking a thoughtful approach and making adjustments, rather than taking a hammer to the tax and eliminating it altogether. Raising the threshold to $1 million or even $2 million would help a large chunk of the heirs who currently pay the tax while preserving most of the revenue the state so urgently needs to provide essential services, meet obligations and invest in the future we all want to see.

With the plan announced today, New Jersey’s leaders are once again severely diminishing the state’s ability to invest in more affordable higher education, cleaner air or a stronger safety net for those who have fallen on hard times. At a time when New Jersey can’t even meet its constitutional and moral obligations, let alone make investments critical to our future, our legislative leaders are choosing to dig our financial hole hundreds of millions of dollars deeper.

And they are doing so only to bail out around 4,000 of New Jersey’s wealthiest heirs each year. Eliminating the estate tax will help the largest estates the most, with those inheriting assets of more than $5.34 million who will see an average tax break of $1.3 million – at a cost to New Jersey of over half a billion dollars a year.

Like the plans that came before it, this latest proposal has absolutely nothing to do with tax fairness.

Cut the Politics and Make a Smarter Transportation Funding Deal

Posted on by Jon Whiten

This op-ed appeared in the July 16, 2016 edition of the Star-Ledger.

New Jersey’s leaders must resist so-called “tax fairness” proposals that would bring more pain than fairness to the overwhelming majority of the state’s residents. But the longer New Jersey goes without securing a new deal injecting some financial life into its nearly-bankrupt Transportation Trust Fund, the louder the voices urging our leaders to cut a deal – any deal – will become.

The deals that Gov. Christie, Senate President Sweeney and Assembly Speaker Prieto have put forth simply aren’t deals worth making.

Instead of continuing to hold essential funding for transportation hostage to special interests seeking big tax cuts that will accelerate New Jersey’s steady decline, our leaders must lead. With weeks left to go, legislators must return to Trenton and ensure there will be money in the Transportation Trust Fund come Labor Day. But they should reject both deals on the table and fix our transportation-funding crisis without creating new crises.

A true compromise would shelve most of the tax cuts and hold their budget impact to under $400 million a year. And if that’s not good enough to satisfy Grover Norquist and the governor, then lawmakers have no choice but to patch together enough additional debt to make it to 2018. It’s not ideal, but the havoc that the current alternatives would wreak on our state’s future is too grave a threat.

The Christie/Assembly plan would save the average New Jersey family less than $6 a week but cost New Jersey $1.8 billion a year, depriving New Jersey of resources it needs to thrive, from helping to make college affordable to protecting our environment to ensuring that the least fortunate among us have adequate assistance to get by.

Meanwhile, the Senate plan would blow a nearly $900 million a year hole in the state budget while repealing a common-sense tax on inherited wealth – the estate tax – that helps fight inequality and boost the common good. This would give a big tax break to people who hardly need a break – those inheriting estates with over $675,000 in taxable assets. Fewer than 5,000 of the 70,000 people who die each year in New Jersey are wealthy enough to be passing estates this large onto their heirs.

Tax-cut tradeoffs might make for good politics but they make for bad policy. If our leaders feel they must include these tradeoffs, they should limit the impact on the budget as much as possible.

Take, for example, the proposal to raise the gas tax, increase the state EITC, expand the tax break on retirement income and raise the estate tax threshold to $2 million. It would address some tax issues without breaking New Jersey’s piggy bank or needlessly delivering extravagant rewards to New Jersey’s fortunate few. The total price tag would be less than $400 million.

But therein lies a key problem: less than $400 million in tax cuts is unlikely to satiate the appetite of a governor increasingly concerned with burnishing his credentials for a national political audience. So then what? Should lawmakers let the governor feed the state a bottle of poison, even when they’ve read the warning label?

No. And the good news is they don’t have to.

They could instead follow the lead of Assemblyman Wisniewski and put forward a proposal to finance new debt at a cost of $150 million to $300 million to maintain two years of transportation projects, which will permit current and a few future projects to be funded, keep people working and pass the task of enacting stable, long-term funding to a new governor and legislature in 2018.

While that’s certainly not the long-term transportation-funding fix that we and other advocates had hoped for, it is much better for New Jersey’s long-term health and growth than cutting a very bad deal.

New Jersey’s Subsidy Surge Tops the $7 Billion Mark

Posted on by Jon Whiten

subsidies annual amounts july 2016-01

Today New Jersey’s surge in subsidies topped $7 billion as the state approved $174 million in new tax breaks for corporations.

New Jersey has now OK’ed over $7.1 billion in these special tax breaks since January 2010, and more than $4.5 billion since December 2013 alone under the misleadingly-named “Economic Opportunity Act.”

The financial largesse that continues to greet very few large corporations is creating a ticking time bomb for New Jersey. For a state already so deep in a hole, it’s astonishing how eager policymakers are to keep digging the hole even deeper.

This surge in subsidies is creating a long-term and growing economic drag that policymakers will have to grapple with for at least the next 15 years as the backlog of tax credits is paid out. In fact, these tax breaks will cost New Jersey an estimated $2.8 billion through fiscal year 2020, or an average of $550 million a year. That’s a substantial amount of revenue that could be put to much better use by investing in the assets that, unlike tax breaks, are proven to grow New Jersey’s economy, like higher education or transportation, or providing a stronger safety net for the growing numbers of working New Jersey families and children who are living in poverty.

And the negative impact on New Jersey’s finances is only going to grow after 2020, as more of the corporations who’ve been approved for tax breaks in recent years cash in. Of the $4.1 billion in tax credits approved between December 2013 and April 2016, for example, only $12.9 million – or 0.3% – has been redeemed to date, according to the Economic Development Authority.

What’s more, this over-reliance on tax breaks to try to boost the state’s economy has done little to move the economic needle or grow good jobs. As of May 2016, New Jersey, with among the most lucrative corporate subsidy offerings in the country, is one of just 9 states that hasn’t yet recovered all the jobs it has lost since the Great Recession’s official start in December 2007.

UP TO DATE DATA ON NEW JERSEY & CORPORATE TAX SUBSIDIES:

The 2010s Have Seen a Subsidy Surge

  • $7.1 billion: The dollar amount of total business tax breaks approved by New Jersey since January 2010. This is up from $1.2 billion the entire previous decade.
  • $90 million: The monthly rate of business tax breaks awarded since January 2010. This is up from $10.1 million in the 2000s.
  • $59,900: The cost per job of these subsidies since January 2010. This is up from $16,400 in the 2000s.

2013 Legislative Overhaul Opened the Floodgates Even Wider

  • $4.5 billion: The dollar amount of total business tax breaks approved by New Jersey since December 2013, when the 2013 legislative changes went into effect.
  • $141 million: The monthly rate of business tax breaks awarded since December 2013.
  • $80,400: The cost per job of these subsidies since December 2013.

Sales Tax Cut Would Decimate Essential Services and Investments

Posted on by Gordon MacInnes

On the night of June 27, the New Jersey Assembly – at the urging of Gov. Christie – approved a bill sight unseen to cut the sales tax by 14 percent.

With New Jersey in such dire financial condition that it cannot meet past, current or future obligations, it is simply reckless to forego up to $1.7 billion in sales tax collections as a trade-off for replenishing the Transportation Trust Fund. If enacted, New Jersey’s credit rating – already the second lowest in the nation – would very likely be downgraded, significantly driving up borrowing costs.

The sales tax is the largest funding source for the general budget so a cut of this magnitude would blow a lethal hole in an already sinking ship.

The numbers are straightforward and the consequences are frightening:

tax cut math-01

About 46 percent of general fund expenditures rely on the $9 billion in sales tax collections. However, there are certain obligations that cannot be reduced, eliminated or put off to future years. For example, New Jersey cannot become the first state since the Great Depression to not pay the interest and principal due on its $43 billion in debt, and it is also legally required to pay the employer share of employees health benefits and pension payments to public employees. There are other areas – like public safety and the legislature – that are likely off limits for significant spending reductions.

This leaves a target list of just $8 billion in spending that would be vulnerable to the $1.7 billion sales tax cut. In other words, we’re looking at a potential 21 percent cut.

So which remaining budget items would be expected to make do with less? The same ones that have endured flat funding, relentless cuts or budget raids to make up for insufficient revenue over the years. Here’s a sampling:

  • Public colleges and universities (which have seen a 23 percent cut in inflation-adjusted state support since 2008)
  • Safety net programs like WorkFirst New Jersey (where the level of cash assistance hasn’t been increased since 1987, thereby losing half of its value to New Jersey’s poorest families with kids)
  • Pre-K expansion (which needs $550 million in funding a year to fully implement the 2008 expansion)
  • Charity care payments to hospitals (which were reduced by $200 million from 2016 to 2017)
  • Clean energy programs (which have been raided by more than $1.3 billion this decade)
  • Women’s health funding (which has been shortchanged by nearly $50 million since 2011)

New Jersey can only honor its obligation to families who are struggling to get by in high-cost New Jersey if these programs are properly funded. Without long-term public investments in these building blocks of a strong state economy New Jersey has little chance to restore prosperity. In fact, its economy would only worsen.

It’s July 1 and There’s No Transportation Funding Fix. What’s Next?

Posted on by Gordon MacInnes

This op-ed appeared in the July 1, 2016 edition of NJ Spotlight.

June 30 came and went without approval of a plan to raise much-needed revenue to invest in transportation projects around the state. Despite the dire need to inject new life into the moribund Transportation Trust Fund, New Jersey residents should breathe a sigh of relief that the governor and Legislature failed, since both proposals being considered this week in the name of “tax fairness” would have improved transportation funding but at the price of serious financial and economic damage to the state.

This failure — which came despite numerous 11th-hour, secretive and top-down efforts — grants political leaders the chance to draw a deep breath, sigh, and then return to continue their conversations in July. So what should they do?

Let’s start first with what they shouldn’t do.

They should not follow either of the plans that made it to the finish line this week — and here’s why.

The plan concocted by the governor and passed by the Assembly would have raised fuel taxes to the tune of about 23 cents a gallon, funding a robust capital transportation plan for 8 years. The “tax fairness” element was a 1 percent cut to the state sales tax and expanding the tax break on retirement income by 400 percent while allowing higher-income families to qualify for it by also expanding eligibility. These cuts, once fully phased in, would have cost New Jersey $1.8 billion a year. In all, they would have drained at least $17 billion from the state’s coffers over the next 10 years.

These tax cuts would have saved the average New Jersey family less than $6 a week but would make it impossible for the state to meet its current and future obligations, provide essential services, or invest in priorities important to families across the state. The most devastating consequences would most likely be reserved for the poor and working-class families who rely on the state the most just to get by. But middle-class families would see school aid drop, public college tuitions and student debt rise as they contend with falling incomes. Given that the state government of New Jersey is already broke, this is more than rhetoric — it is an indisputable reality.

Ironically, on the same day the Assembly chose to blow this hole in the budget, it approved withholding payments to companies that qualified for $800 million in cash reimbursements for tax breaks under the BEIP program and approved a constitutional amendment calling for quarterly pension payments that rise to $5 billion for which no funding is available. In other words, New Jersey is effectively broke and unable to meet its current and future obligations even if the sales tax is not reduced. Enacting the proposed $1.6 billion reduction will lead to new downgrades in the state’s credit rating, higher borrowing costs, and severe cuts to essential programs and services.

On the Senate side, the price tag for “tax fairness” was lower — about three-quarters of a billion dollars a year — but the proposal was just as flawed. It would have raised slightly more than the Assembly from fuel taxes and funded a robust transportation program for 10 years. The price was the complete elimination of New Jersey’s estate tax, the same 400 percent expansion of the retirement income-tax break, a new charitable deduction against state income taxes and a boost to the state Earned Income Tax Credit.

The problem here was not just the loss of critically needed funds — though that was a problem — but that the bulk of the tax benefits would go to the heirs of less than 5,000 wealthy decedents each year while all 9 million of the rest of us pay the higher gas taxes.

So back to the question: What’s to be done?

  • First, declare an impasse and adjourn until after the July 4th weekend.
  • Second, remind everyone that this is about having secure funding to invest in New Jersey’s greatest competitive economic advantage, its location in the middle of the world’s largest market with access to the world’s most important city and to Philadelphia. That advantage only works if stable funding for maintaining, expanding, and improving its networks of roads, bridges, and public transit becomes the organizing purpose of summer legislative sessions. Lawmakers need to keep their eye on the ball of a secure Transportation Trust Fund and not continue to be distracted by every shiny tax cut and pet tax break that comes along.
  • Third, accept that a long-term and robust solution to the transportation-funding problem — at least one that doesn’t come with tag-along policies that will harm the state — is unlikely in the current political climate. This is unfortunate, but it’s the reality in which legislators, as well as the advocates and lobbyists pushing for a trust-fund fix, must operate for the sake of the future of our state.
  • Fourth, put forward a proposal to finance new debt at a cost of $150 million to 300 million to maintain two years of transportation projects, which will permit current and a few future projects to be funded and will pass the task of enacting stable, long-term funding to a new governor and Legislature in 2018.

New Jersey already has the second-worst credit rating in the nation because Wall St. has determined that it can’t reasonably meet its debt and other liabilities. Unless our political leadership is anxious to capture last place, it should abandon cries for fictional “tax fairness” and demonstrate that it wants to invest sensibly in New Jersey’s future.

Christie Vetoes Needlessly Punish New Jersey’s Poorest Children

Posted on by Raymond Castro

Last night Gov. Christie dashed the hopes of about 40,000 of New Jersey’s poorest children by keeping WorkFirst New Jersey assistance stagnant for yet another year, and kept in place an outdated policy that punishes poor children for being born.

By vetoing legislation, as well as budget language, that increased assistance and repealed the “family cap,” Gov. Christie is looking the crisis of deep child poverty right in the eye, and turning away without action.

This assistance hasn’t been increased in 29 years at the same time that rents have doubled. Leaving it where it is will only further increase income and racial inequality in our state. And the family cap has prevented over 20,000 poor kids from receiving assistance for no reason other than that they were born to poor parents.

By taking these punitive actions, Gov. Christie is putting New Jersey further out of step with other states, many of which have increased benefits and repealed the family cap in recent years, and with New Jersey’s Republican governors like Gov. Kean and Gov. Whitman, who have in the past supported and expanded WorkFirst New Jersey.

Proposed Tax Package Would Dig New Jersey’s Hole Much Deeper

Posted on by Jon Whiten

To read a PDF of this Fast Facts, click here.

The outlook for New Jersey’s economic future went from bad to worse this week, as legislators hastily pushed forward a tax-cut plan that would cost the state about $17 billion over the next 10 years as the price for finally enacting a gas tax increase for essential transportation capital funding over the next 8 years.[1] At a time when the state already cannot meet its current and future obligations, invest in the assets that grow a strong state economy or provide a strong safety net for its neediest residents, blowing a hole of this magnitude in the state’s budget is reckless, short-sighted and – indeed – unfair.

The largest piece of the plan is a cut in New Jersey’s sales tax, to 6 percent from 7 percent, which will go into effect over two years. This would be paired with a 400 percent increase – phased in over 4 years – in the threshold at which retirement income is subject to personal income tax. The annual loss from these tax cuts would top $1 billion in Fiscal Year 2018, hitting $1.8 billion by the time both are fully phased in and grow up to $2.2 billion by Fiscal Year 2026, assuming relatively conservative rates of growth.

decade of revenue loss-01

This projected revenue loss does not include the invisible cost that will likely emerge quickly if these tax cuts are enacted in the form of another credit downgrade for New Jersey bond issues, which could come with higher interest rates and tens of millions of dollars in new costs.

These tax cuts would deprive New Jersey of the resources it needs to thrive as a state, from helping to make college affordable to protecting our environment to ensuring that the least fortunate among us have adequate assistance to get by.

It would also deliver a big tax cut to many well-off families who need it least, unlike targeted tax credits designed to help low- and moderate-income working families, like the Earned Income Tax Credit (EITC).

The two tax cuts would give an average annual cut of nearly $2,000 a year to the top 1 percent – those with annual household incomes over $808,000 – and an average cut of $84 to those in the bottom 20 percent earning less than $25,000. Those in the middle 20 percent (household incomes between $49,000 and $79,000) would get an average tax cut of $253 a year.[2]

sales tax and retirement income-01

After accounting for both the tax cuts and the fuel tax increases, the top 1 percent would receive an average annual tax cut of $1,021, the bottom 20 percent would receive an average cut of $3 – or a nickel a week – and the middle 20 percent would receive an average cut of $63.

Of course, lower- and middle-income families also have – by definition – less income, so it’s also instructive to look at the impact of any tax change as a share of income. This package would make the state’s tax structure slightly less equitable by offering the smallest – nearly invisible, in fact – reduction of the average share of state and local taxes paid to the income groups that already pay the highest share – those earning less than $49,000.

who pays proposed plan june 2016 v2-01

Endnotes

[1] NJPP estimates based on currently unpublished Office of Legislative Services (OLS) fiscal note on bill A-12. NJPP used figures directly from OLS for the first 6 fiscal years’ impact, and then projected the increases over the next 4 years based on OLS’s estimated rates of growth. The range for 10-year budget impact is between $16.7 and $17.2 billion, from Fiscal Years 2017-2026. The low of the range represents annual FY 2023-2026 growth of 3 percent on the retirement income exemption; the high of the range represents annual FY 2023-2026 growth of 4 percent on the retirement income exemption.
[2] Analysis using Institute on Taxation and Economic Policy microsimulation, using 2016 incomes. The analysis is targeted to tax impacts for New Jersey residents only using an estimate that non-residents pay 20 percent of New Jersey sales taxes and 28 percent of fuel taxes.

Shorter-Term TTF Plan + Much Larger Tax Cut = Bad News for New Jersey’s Future

Posted on by Gordon MacInnes

The outlook for New Jersey’s economic future went from bad to worse last night in Trenton, as legislators hastily pushed forward a tax cut plan that would cost the state about $1.7 billion a year as the price for finally enacting a gas tax increase for essential transportation funding. At a time when the state already can’t meet its current and future obligations, invest in the assets that grow a strong state economy or provide a strong safety net for its neediest residents, blowing a hole of this size in the state’s budget is reckless, short-sighted and – indeed – unfair.

Late last night the Assembly approved a revised omnibus tax bill that raises fuel taxes and cuts New Jersey’s sales tax rate to 6 percent, from 7 percent. The bill no longer includes the elimination of the estate tax, a new charitable deduction exemption, or the increase in the Earned Income Tax Credit. But it does still include an increase in the retirement income tax exemption.

The bottom line: While we are pleased that the estate tax is preserved under this new legislation, that doesn’t disguise the fact that the bill will have larger and far-reaching negative effects on the state’s ability to pay for essential services, contractual obligations and key investments.

In fact, the hole it blows in the budget (approximately $1.7 billion) is twice as large as the hole the previous plan would have created (approximately $870 million).

At the same time, the plan put forward last night is a shorter-term transportation-funding fix (8 years) than the original proposal (10 years).

This proposal, on the surface, is a fairer plan, in that it’s not a tax shift primarily from the wealthy to the working- and middle-class. But that advantage evaporates as soon as the gaping budget hole causes New Jersey to cut vital services, lay off employees or shrink the social safety net.

Will Killing Estate Tax Raise All Boats?

Posted on by Jon Whiten

This Q&A with the editorial page editors of Gannett’s New Jersey newspapers appeared in the Sunday, June 26, 2016 editions of the Asbury Park Press, Courier-News, Home News Tribune and other Gannett papers. 

We keep hearing that millionaires are moving out of the state in droves to escape high taxes. But there is plenty of evidence to the contrary, correct?

The facts flat out debunk the myth of millionaire flight. We aren’t running out of wealthy New Jerseyans. In fact, we have the fourth highest share of millionaires of all states, and their numbers increased by 11 percent in the last decade. In addition, the number of families with taxable incomes over half a million dollars nearly doubled between 2003 and 2013 – a time in which income taxes were raised on these folks not once, but twice. Lastly, revenues from the estate tax itself are at an all-time high, and are projected to grow by over 40 percent in just the next five years.

So who keeps driving that myth? Is it too simple to blame stodgy Republicans for trying to protect their rich benefactors?

The myth’s been broadcast for three decades nationally and is repeated frequently by some of the state’s loudest voices in the public debate, from our governor to leading legislators to powerful business lobbyists.

There are a few other reasons:

Every New Jerseyan seems to know someone who left the state because they felt they couldn’t afford to live here anymore. In reality, that decision is driven primarily by housing costs and property taxes, which can create serious financial strains for middle-class families and recent retirees. That storyline is frequently simplified to, “They left due to high taxes.” And well-funded lobbies seeking to eliminate taxes on wealthy New Jerseyans are more than happy to step in and insert “estate” or “income” into that sentence. It’s a scare tactic that attracts attention.

There’s also a psychological aspect: lots of people who think they’ll be affected by the estate tax don’t end up owing any. In fact, while between 10-12 percent of heirs to deceased New Jerseyans file paperwork for the estate tax in any year, less than half actually end up owing the estate tax.

Supporters of eliminating the estate tax say that would help keep more of our precious millionaires in the state. But they also insist New Jersey’s estate tax affects the middle class as well as the wealthy because we have the lowest exemption threshold in the nation — $675,000. To what degree – if any – is that true?

It’s disingenuous to claim this tax affects the “middle class” when it’s actually only paid by the largest 4-5 percent of estates left behind by everyone who dies in New Jersey in any given year. This tax clearly is concentrated at the very top of the wealth scale.

Also missing from public conversation is the fact that these heirs still get a pretty good deal. If you inherit taxable assets of $675,000, you would pay less than $20,000 in taxes – netting over $650,000 in new wealth.

Would you be more comfortable raising the threshold to soften that supposed middle-class impact without completely eliminating the tax? Or would you prefer to leave the law as it is?

Raising the threshold to $1 million is a reasonable alternative; it would eliminate the tax for about 2 of every 5 payers, and preserve nearly all the revenue. It would also bring us in line with several other states, removing our “outlier” status on the threshold level. That said, the estate tax serves a crucial purpose. It provides revenue that helps communities thrive. The financial and economic benefits to the common good from maintaining this tax far outweigh any benefits from cutting it or, certainly, from eliminating it.

It does seem to be a fair point that New Jersey’s “death taxes” are particularly onerous, not only because of that low threshold but because the state is one of only two to have both an estate and inheritance tax. Why is New Jersey on the extreme side of death taxes?

It’s really the result of a coordinated decades-long campaign to eliminate taxes on inherited wealth. The dismantling of the federal estate tax under George W. Bush, in particular, led a number of states to follow suit. Thankfully, New Jersey hasn’t yet joined that race to the bottom.

Wouldn’t the absence of an estate tax exacerbate the growing wealth gap between haves and have nots? Or do you buy the trickle-down notion that more contented rich people will produce a more contented middle class?

It absolutely would widen the wealth gap. New Jersey’s estate tax, in fact, was created 82 years ago in response to the concentrated wealth and inequality of the 1920s. Today, inequality is as high in New Jersey as it was back then. So there’s a very strong need to maintain taxes on the largest amounts of inherited wealth.

The idea of eliminating the estate tax is gaining traction as a “tax fairness” tradeoff for a likely gas-tax hike to fund transportation. But we’re guessing you wouldn’t call it “fair” at all, would you?

Pairing a tax increase that will be most felt by working-class and low-income New Jerseyans with a major tax cut that will deliver all of its benefit to the state’s wealthiest heirs isn’t tax fairness at all. It’s tax injustice.

So if you had to come up with a tax reduction to offset an increase in gas taxes, what would you suggest?

There should be help for New Jerseyans making under $45,000 a year. We’re grateful that lawmakers heeded that call by including an increase in the Earned Income Tax Credit, which would help even out the impact of higher gas prices for most working New Jerseyans – but given the overall package, it’s clear that a few thousand of the richest families would benefit far more from the currently proposed deal, at the expense of the other 9 million New Jerseyans.

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