NJCPA Supports Compromise Solution
On Estate and Gas Taxes
ROSELAND, NJ – “A unique set of circumstances provides New Jersey lawmakers with the opportunity to tackle two vital issues important to the state’s economic climate at one time, and to do so in a bipartisan manner that will unite both parties and both the legislature and the administration in support of fiscally sound, pro-growth policies,” says New Jersey Society of Certified Public Accountants (NJCPA) CEO & Executive Director Ralph Albert Thomas, CGMA. “Now is the time for lawmakers to unite around a compromise package that would combine a reduction in the state’s onerous ‘death’ taxes (that cause NJ residents and businesses to flee the state) with an increase in the gas tax that would be dedicated solely to funding the state’s neglected transportation infrastructure system.”
For more than a decade, New Jersey has had the highest death taxes in the nation. The Garden State is one of only two states that has both an estate tax and an inheritance tax and, unlike most states, NJ never hiked its $675,000 exclusion to match the federal exclusion of $5.1 million. A recent survey by the NJCPA found that 83 percent of NJCPA respondents feel estate and inheritance taxes have prompted clients to leave the state. And 71 percent have actually advised clients to relocate to another state due to NJ’s estate and inheritance taxes. A strong majority (84 percent) think these taxes impact the state’s middle class just as much as the affluent.
There are more than a dozen bills pending in the state legislature that would reduce or eliminate the state’s estate and inheritance taxes, and the NJCPA has made passage of meaningful death tax reform a top legislative priority for 2015. The Society is not alone. Other leading business and taxpayer groups, including the NJ Business & Industry Association, NJ Chamber of Commerce, and Commerce & Industry Association of NJ, support reducing the burden of these taxes.
The political climate in Trenton has made it difficult to advance death tax reform in recent years, but a crisis in another area that involves taxation provides a unique opportunity to move death tax reform forward, while at the same time providing a fiscally responsible solution to another problem that has plagued the state for years. As of June 30 of this year—approximately 160 days from now—New Jersey’s Transportation Trust Fund (TTF) will become insolvent, and critical road and transportation infrastructure projects that businesses and the public depend on may grind to a halt. The state would also stand to lose more than $1.6 billion in matching federal transportation funds.
“The NJCPA feels that a state-of-the art infrastructure is crucial to making New Jersey a competitive state in which to do business in the 21st century and beyond,” adds Thomas. “That is why the NJCPA strongly supports establishing a stable, dedicated funding mechanism for the TTF that will avoid the overreliance on issuing bonds, which has contributed to the current TTF funding crisis. And our transportation infrastructure problems can’t be ignored or put on hold for a few years.” A recent report indicated that 651 bridges in the state are structurally deficient, while 67 percent of our roads are in poor or mediocre condition.
Most independent public policy analysts believe—and even most conservative lawmakers and pro-business advocates will admit privately—that some form of an increase in the gas tax dedicated strictly to funding the TTF is essential to maintaining our transportation system. “The NJCPA does not like tax increases, no one does, but the reality is that a hike in the gas tax has to be a part of any solution to help ensure that our transportation infrastructure is sound,” notes Thomas. “And saving and stabilizing the TTF is essential to the state’s economic viability as well as making our roads and bridges safe and efficient for the public.”
At 14.5 cents a gallon, New Jersey’s gas tax is the second-lowest in the nation (New York has a 50.6-cent tax and Pennsylvania’s is 32.3-cents.) It has remained the same since 1988, at which time it represented about 11 percent of the cost of a gallon of gas. Today, even with the recent plunge in gas prices, it represents only about 5 percent. It’s also important to note that approximately 30 percent of the funds raised by the gas tax will come from out-of-state residents who buy their gas in New Jersey.
For many years, there has been a dedicated group of NJ lawmakers who have been out front advocating for death tax reform. Another group of lawmakers, concerned about the disintegration of the TTF, has been articulating the realistic need for some sort of gas tax increase to keep the TTF viable. “Now is the time to merge these two tax issues and forge a compromise package that will reduce the state’s death taxes and bring our transportation system back from the brink of oblivion. Both are critically necessary to improve the state’s business climate and generate economic growth and both are reasonable, fiscally responsible measures,” comments Thomas. “We urge lawmakers from both parties to work together quickly to pass a compromise legislative package that would lessen the state’s onerous death tax burden and provide stable funding for our transportation infrastructure needs. Our state’s economic vitality requires it, and our window to seize this opportunity is rapidly closing.”
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The New Jersey Society of Certified Public Accountants, with more than 15,000 members, represents the interests of the accounting profession and advances the financial well-being of the people of New Jersey. The NJCPA plays a leadership role in supporting the profession by providing members with educational resources, access to shared knowledge and a continuing effort to create and expand professional opportunities. Visit njcpa.org.