Senate President Steve Sweeney and Assembly Speaker Vincent Prieto announced Friday that they had come to terms on a new agreement to replenish the state's depleted Transportation Trust Fund and gradually phase out the estate tax.
The plan calls for a 23-cent-per-gallon gas tax increase, which Sweeney (D-West Deptford) and Prieto (D-Secaucus) say will generate $1.2 billion each year in new revenue and provide support for approximately $2 billion in annual infrastructure investments.
The agreement also calls for several concessions in conjunction with the gas tax hike, such as a plan to gradually phase out New Jersey’s estate tax over the next three to four years.
“We have an agreement on a plan that is needed to address the state’s critical transportation needs at the same time it provides targeted tax savings for retirees, the working poor and middle class families,” said Sweeney. “This is a bipartisan plan that supports a $2 billion a year Transportation Trust Fund and provides affordable tax cuts that will allow us to meet the state’s pension obligations without creating a fiscal crisis. This is an investment plan that will create jobs and support immediate and long-term economic growth.”
Sweeney and Prieto estimate that 35 percent of the new gas tax burden would fall on out-of-state motorists.
The attention will now shift to Gov. Chris Christie, who late last month agreed on an 11th-hour plan with Prieto to tie a 23-cent-per-gallon gas tax increase with a decrease in the state’s sales tax from 7 percent to 6 percent. Sweeney didn’t support the agreement, citing budget concerns.
“The Assembly acted to fund transportation, but this stalemate cannot continue,” Prieto said. “As I’ve been saying for more than two years, New Jersey needs a viable Transportation Trust Fund or we risk economic disaster. With efforts to negotiate a compromise with the governor stalled, I’m pleased to reach this new compromise that will provide much-needed investment in our state’s infrastructure and tax relief. I will now look for a firm commitment of strong support from Assembly Republicans to keep our roads and bridges safe and workers on the job. This is too important for our economy. We must get this done for the benefit of our state’s future.”
Sweeney says he plans convening the Senate Budget and Appropriations Committee next week to amend the bill passed by the Assembly last month and reflect the changes.
Under the new agreement, the plan to phase out the estate tax is similar to a bipartisan bill cosponsored months ago by state Sens. Paul Sarlo (D-Wood-Ridge) and Steven Oroho (R-Sparta). The exclusion rate on the estate tax, which currently applies to inheritances valued at $675,000 or more, would be upped to $2 million beginning Jan. 1 and then to the federal level of $5.4 million by Jan. 1, 2018. By Jan. 1, 2020, the tax would be completely eliminated.
Taking another page from the legislation put forth by Sarlo and Oroho, the plan would also increase the threshold for retirement income exemptions for married couples to $100,000 over four years. Exclusion rates would be increased to $50,000 for married couples filing separately and $75,000 for single taxpayers.
The business community has long been advocating for estate tax repeal and New Jersey Business & Industry Association CEO and President Michele Siekerka recently called on legislators to include it as a component of any gas tax compromise measure.
“It has all the components that we’re looking for, and it’s something that we will support,” said New Jersey Chamber of Commerce Executive Vice President Michael Egenton. “We’re hopefully optimistic that the administration will take a very thorough look at it and recognize that it’s a good compromise.”
The plan also calls for offering a $3,000 personal exemption on state income taxes to qualified veterans, a $500 annual income tax deduction to in-state motorists making up to $100,000 per year and an increase in the Earned Income Tax Credit program to 40 percent.
New Jersey Policy Perspective President Gordon MacInnes railed against the idea of tying a gas tax increase to estate tax reform.
"There is no doubt that there is an urgent need to address New Jersey's transportation funding crisis, put money into the Transportation Trust Fund and get people back to work across the state,” MacInnes said. “But tying any plan to do so to an outright elimination of the state's estate tax is financially reckless and endangers the state’s future while delivering big financial rewards to the fortunate few who will no longer have to pay New Jersey taxes on multimillion-dollar estates they inherit.”