Some New Jersey lawmakers are trying to take away one of the state’s most effective tools for both reducing inequality and building a thriving state economy at a time when the Garden State cannot afford to lose it.
The legislature is considering eliminating the estate tax as a bargaining chip to make a much-needed but unpopular gas tax increase more palatable. That would have disastrous consequences for essential public investments while putting more money into the hands of the state’s most well-off heirs, according to a new report by the Center on Budget and Policy Priorities.
As we have noted, a supermajority of New Jerseyans will never owe estate taxes. The tax, which is levied on all estates valued at more than $675,000, is paid by just 4 percent of estates per year. At a time when the imbalance between the richest and the rest is so extreme, a huge tax break for those at the top would only make this economic inequality worse.
The report also highlights how the estate tax helps – not harms – a state’s economy. Money that is collected through New Jersey’s estate tax helps communities thrive by providing hundreds of millions of dollars for higher education, transportation, health care and safe communities. Eliminating this revenue puts New Jersey’s economic future at risk due to the harm that subsequent service cuts can have on businesses and communities that depend on those services.
The report makes clear that claims that the estate tax harms the state’s economy by causing retirees and others to leave the state are exaggerated and are backed up with no credible evidence to support them. A review of recent studies finds that taxes have little to no effect on whether and where people move, and that the estate tax specifically has a small effect on the residence decisions of the very wealthy elderly. That confirms what we see here in New Jersey, where collections from the estate and inheritance taxes have risen by over 40 percent over the last 13 years. The negative impact of the estate tax, therefore, has only a small effect on a state’s economy and revenue collections – certainly much smaller than the impact of eliminating it.
Policymakers who are concerned about record levels of inequality and making sound investments that benefit all New Jerseyans should take this report to heart, and preserve the estate tax. New Jersey is in no condition to lose it.
