By Elise Young, Bloomberg News (TNS)
TRENTON, N.J. — Everyone runs into death and taxes. New Jerseyans trundle on toward an afterlife in tax hell.
“I can afford to retire here,” said Susan Barbey, a 60- year-old resident of Ridgewood, about 20 miles (32 kilometers) from Manhattan. “I can’t afford to die here.”
No other U.S. state reaches as deeply into the pockets of the dearly departed and their heirs, a ritual good for $755 million in New Jersey’s coming fiscal year. Although Gov. Chris Christie says he wants inheritance and estate taxes gone, he’s fallen too short of a promised fiscal resurgence to do so.
As Christie considers a 2016 presidential run, he may be outshined by fellow Republican governors and potential challengers John Kasich of Ohio, Mike Pence of Indiana and Terry Branstad of Iowa, who all have ended such levies. Even Democratic-led Maryland, the only other state with both taxes, raised an exemption last year.
Christie’s advisers recommended repealing the post-mortem whammy when he took office in 2010. Even though he hasn’t, the governor has made it fodder for audiences as he tries to win over Republicans in early-primary caucus states including Iowa and New Hampshire.
“We tax it when you invest it, and then we tax it when you die, and then in some states like mine, we tax your heirs who take it,” Christie said March 7 at the Ag Summit in Des Moines. “It’s crazy, and it’s not good for families, and it’s not good for our economy.”
A repeal of the federal estate tax, which kicks in at $5.4 million and takes as much as 40 percent, was part of the Republican platform in the 2012 presidential election. Pence and Kasich got it done on the state level for 2013, and Branstad, the next year.
Since the 18-month recession ended in 2009, at least 11 states, six led by Republicans, have eliminated or lessened such taxes.
New Jersey claims a maximum 16 percent of estates valued above $675,000. The state also taxes inheritances at a top rate of 16 percent.
Maryland’s inheritance tax is 10 percent. It has a top 16 percent estate tax. Its exemption, which was $1 million in 2014, will rise gradually until it meets the federal threshold, which is tied to inflation, in 2019, under legislation enacted by Democratic Gov. Martin O’Malley, who has said he is considering a 2016 presidential candidacy.
New Jersey residents pay the highest property taxes in the U.S., an average $8,161 in 2014. Although the nation topped its prerecession employment peak in May, New Jersey has regained only 62 percent of the 259,000 jobs lost, according to its labor department. Neighboring New York’s finances have been so robust that last year, it was able to more than double its estate exemption, to $2.06 million, and in 2019 it will match the federal figure.
People are leaving New Jersey faster than any other state, according to a study by United Van Lines, the moving company. Sixty-five percent of New Jersey household moves handled by the company last year were out of state.
The migration is a symptom, Christie said, of a tax-and- spend culture that’s driving residents to lower-cost destinations such as Florida and North Carolina. Those states are among the 31 without taxes on estate transfers or inheritances, according to data from McGuireWoods LLP, an international law firm.
Last month, Christie proposed a $33.8 billion fiscal 2016 budget whose 3.8 percent tax-revenue growth is swallowed by rising costs for pensions, benefits and debt service. Over three years, his proposed retirement contributions have totaled $2.67 billion, less than half the $6.95 billion he pledged, and the unfunded obligation has reached $83 billion.
To raise revenue, Democrats who lead the legislature passed a millionaires tax that Christie vetoed four times. He’s also resisted their drive to raise the 10.5-cent-per-gallon gasoline tax. Only Alaska’s is lower.
For the year that starts July 1, Christie may need as much as $7.4 billion more to sustain programs, according to the nonpartisan Office of Legislative Services.
New Jersey has no alternative to revenue from taxes on estates and inheritances, said Gordon MacInnes, a former Democratic state senator who is president of New Jersey Policy Perspective, a Trenton group that advocates higher spending.
“Talking about further reducing our out-of-balance budget by cutting revenues makes no sense at all,” MacInnes said. If finances were stronger, “it would make sense to increase the threshold for triggering the estate tax.”
Assemblyman Declan O’Scanlon Jr., a Republican from Little Silver, is co-sponsoring a bill to do just that, and to eliminate the inheritance penalty. The policies would appeal, he said, to high-wealth retirees with investment income.
“It isn’t just the death taxes that we lose when someone leaves,” O’Scanlon said. “We lose the income tax from the time they change their residence to the time they die, and those could be the highest-income years in these people’s lives.”
New Jersey lawmakers haven’t voted on any of 20 proposals to ease taxes on assets of the dead and their heirs.
Barbey, the Ridgewood resident, has set a Dec. 31 deadline: The taxes ease or she moves.
Single with no children, she wants to leave her money to two nephews and a niece. New Jersey applies rates according to how closely a deceased was related to heirs, taking more for more distant relatives.
“I’ve been an investor for 30 years — I did everything I’m supposed to do so I don’t become a ward of the state,” said Barbey, who worked in publishing and marketing. “If I die today, the stinking state is coming in.”
(c)2015 Bloomberg News, Distributed by Tribune Content Agency, LLC
Photo: Peter Stevens via Flickr