Increased Gas Tax – How Does it Impact NJ Estate Tax? #NewJerseyEstateTax
On Friday, Governor Christie and Democratic leaders in the New Jersey Legislature announced they had reached a compromise on funding New Jersey’s bankrupt transportation fund, which pays for road and bridge improvement projects and other infrastructure upgrades such as the rail system which has been very much in the news as a result of last week’s tragic Hoboken commuter train crash.
If you have followed the ongoing saga in the last several months, you know that a standoff between Governor Christie and Democratic leaders caused a shutdown of existing road and bridge projects until a decision on how to replenish the transportation fund could be reached. Finally, we have a decision.
What has this got to do with New Jersey’s estate tax? Like any political compromise this one involved some “horse trading”. The highlight of the deal is an increase in the gas tax by 23 cents a gallon, meaning our gas tax will go from the second lowest to the seventh highest. It is reported that this tax will put $16 billion into the Transportation Fund so that much needed improvement projects can be restarted.
The compromise comes in the form of tax cuts in other areas. This includes a small reduction in New Jersey’s sales tax, a reduction in income tax on retirement and pension income, an increase in the Earned Income Tax Credit for low income workers and a phase out of New Jersey’s estate tax.
New Jersey currently has the lowest estate tax exemption in the country. The first $675,000 of assets is excluded from tax but then the tax kicks in beginning at a rate of 4.8% and gradually increasing to a maximum rate of 16% for estates greater than $10.04 million. The plan is to increase the exemption to $2,000,000 for residents who die in 2017 and then eliminate the tax altogether by January 1, 2018.
The bill is scheduled to be signed into law on Wednesday. So, does it really mean the end of the need to do estate and tax planning? Not necessarily. As with any new law, it comes down to reading the fine print and looking at how it will or won’t impact the current system. Part of Trenton’s job is to make the laws. However, they don’t always do a good job of understanding how those laws will work in the real world. I’ll share my thoughts on that with you next week.