Oroho tax bills advance
TRENTON — A pair of tax-cut bills sponsored by Senator Steven Oroho was advanced by the Senate Budget & Appropriations Committee.
Tax-cut legislation championed for years by Senator Oroho to phase out New Jersey’s “estate tax” was approved 9-0. That bill would increase the tax exclusion from the current level of $675,000 to $1 million the first year and complete the elimination over five years.
“We are a big step closer to eliminating the nation’s highest death tax — a reform that would allow parents, grandparents, employers and farmers to stay in New Jersey and pass to future generations the assets that they’ve worked their whole lives to earn,” Oroho said. “This estate tax phase out would restore our competitive economic position by enticing capital back to New Jersey. Just as we enacted $2.3 billion in bipartisan business tax cuts in 2011 to increase financial resources and jobs, we should get this tax cut on the books now to retain more capital and opportunities for the people of this state.”
New Jersey’s estate tax affects the inheritances of homes, properties and savings valued at $675,000 and more, which hurts many middle-class families in New Jersey, especially those in communities that have experienced rapid increases in real estate values over the years.
Oroho noted that low tax threshold is no comparison to the federal estate tax that is levied on estates worth more than $5.43 million or the 36 U.S. states that do not have any estate tax. New Jersey is one of just two states with two different death taxes: the estate tax and the inheritance tax.
The bill would increase the estate tax threshold from $675,000 to $1 million, beginning Jan. 1, 2017, and then continue increasing that exclusion amount until the tax is eliminated. The bill increases the exclusion amount to $2,500,000 for 2018, $3,500,000 for 2019, and $5,000,000 for 2020. For 2021 and thereafter, the bill provides that there will be no more New Jersey estate tax.
The Budget Committee also approved legislation that would cut retirement income taxes for middle-class retirees and senior citizens. That bill would increase the retirement income exemption to $100,000 over three years.
“This tax cut will stem a mass exodus of senior citizens and middle-class retirees who are leaving New Jersey for more affordable states,” Oroho said. “It will keep families together here, allowing grandparents to help raise their grandchildren and children help their grandparents as they grow older. I look forward to the ultimate enactment of this bill, which will bring profound benefits to New Jersey families and our overall economy.”
The bill would increase the exclusion rate on retirement income from the current rate of $10,000 for married filing separately, $15,000 for a single taxpayer, and $20,000 for a married couple to $50,000 for married filing separately, $75,000 for a single taxpayer, and $100,000 for married couples, all over three years. The higher exemptions on state taxes would cover pension income and 401(k), Individual Retirement Accounts and annuity withdrawals.
New Jersey’s neighboring states all have friendlier income tax policies for their retirees. Pennsylvania excludes private retirement income in addition to public pension income. New York excludes $40,000 of income for couples, twice as much as New Jersey.
Among the 41 states with a broad-based income tax, 36 offer exclusions for state or federal pension income or both, exclusions for retirement income, or tax credits targeted at the elderly. Ten states exclude all federal, state and local pension income from taxation, although some of them restrict the state and local exemption to pensions from within the state.