NJAA Supports Measures that would Phase-Out New Jersey Estate Tax; Increase Tax Exclusion for Retirement Income
March 4, 2016
The Senate Budget and Appropriations Committee voted 9-0 to approve S-1728, sponsored by Senator Sarlo and Senator Oroho, which would incrementally phase-out New Jersey’s estate tax. New Jersey joins only one other state (Maryland) in imposing both inheritance and estate taxes, and New Jersey currently has the lowest exemption threshold in the country. S-1728 would begin to phase out the estate tax beginning in 2017 by replacing the current $675,000 exclusion threshold with a $1 million exclusion threshold and then increasing that exclusion amount until the tax is completely eliminated in 2021. 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 tax imposed.
These reforms will help slow the outmigration of both people and wealth from New Jersey to other states, which is splitting families and dampening economic growth in New Jersey. Beyond the generalized benefits to New Jersey’s economy, we anticipate that estate tax reforms would have a specific positive impact on New Jersey’s multifamily apartment communities – many of which are family owned businesses. Since most of the capital in a multifamily property is not liquid, most family real estate companies would need to be sold at the death of a major principal to pay estate taxes. These reforms to the estate tax, phased in over time, would help keep ownership of these properties to those with a long-term commitment to the State of New Jersey. An additional benefit of this policy would be to free critical investment capital that could be channeled back into renovations and rehabilitation projects, thus improving the quality of life for those who choose to live in rental housing.
NJAA applauds this bipartisan effort to address New Jersey’s outlier status in its death taxes, which is dampening economic development and encouraging the outmigration of people and wealth. We will continue to press for action on this important measure in the Senate and the Assembly, and keep NJAA members apprised.