Wednesday, October 26, 2016

Will New Jersey's Estate Tax Repeal "Stick"?

As we all know the legislation adding the gas tax, reducing and repealing New Jersey's estate tax, and increasing the exemption for the tax on retirement income is now law.

We also know that New Jersey's pensions are underfunded and as admitted by the proponents of the legislation, revenue will not match expenditures and therefore the state will have to borrow to bridge the financial gap.

Assume that the next governor is a democrat faced with a deficit and shrinking revenues, what would he or she do? Well in 2017 the estate tax exemption with increase from $675,000 to $2,000,000.  The repeal is scheduled for January 1, 2018. By then we will have a new governor. It's not too much of a stretch to realize that the revenue loss can be partially made up by "freezing" the estate tax repeal.  At $2,000,000 the exemption will reduce the number of taxable estates but not eliminate them. Moreover the number of voters affected would drop dramatically. Keeping the exemption at $2,000,000 might be acceptable to all.

Just a thought!

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