But some suggest raising current threshold of $675,000 without totally eliminating much-debated tax and revenue it generates.

After trying for years with no luck, Republicans and business-lobbying groups this year have successfully seized on New Jersey’s standing as one of only 15 states in the country to still levy an estate tax to generate momentum for repeal.

A bill that would phase out New Jersey’s estate tax over five years passed a key Senate committee with bipartisan support several weeks ago. And Gov. Chris Christie is also on board, calling in January for this year to be the year that New Jersey’s estate tax is finally abolished.

But largely left out of the conversation so far this year has been whether the state really needs to scrap the estate tax altogether, or just update the current estate tax exemption, which at $675,000 is the lowest threshold in the country.

Even as lawmakers are pursuing the full phase-out, there seems to be some room for compromise among the interest groups seeking repeal and those wishing to maintain the status quo. They still disagree, however, on where a new threshold should fall.

New Jersey is one of only two states in the country to levy both a tax on someone’s estate when they die and a tax on an inheritance that is left to someone other than a direct relative or charity.

The state’s $675,000 estate-tax exemption is well below those levied in nearby states, which has helped to put New Jersey lawmakers’ attention primarily on the estate tax instead of the inheritance tax.

For example, New York, Connecticut, Delaware, Rhode Island and Maryland have all set their estate-tax exemptions at over $1.5 million, according to the Tax Foundation, a Washington, D.C.-based organization that tracks state tax policies. Pennsylvania, meanwhile, is one of the many states that do not charge any estate tax at all.

Reason why people leave NJ?

Leading the charge along with Christie for a repeal of the estate tax this year has been the New Jersey Business & Industry Association. The organization released a study of outmigration trends earlier this year that made the case that New Jersey’s estate and inheritance taxes are motivating people in their later years to leave the state. They’re going not only to states with warmer climates, but also to those with less aggressive tax policies, the study said.

Christie cited NJBIA’s research during his State of the State address in January when he called for the Legislature to work with him to repeal the estate tax. Several weeks later, the bipartisan bill that would phase out the estate tax out by 2021 cleared the Senate Budget and Appropriations Committee.

Under the bill, New Jersey’s estate-tax threshold would rise from $675,000 to $1 million starting in 2017, to $2.5 million in 2018, to $3.5 million in 2019, and to $5 million in 2020, before a full repeal in 2021.

Many Democrats have said they’re hoping their support for getting rid of the estate tax will entice Christie and other Republicans to consider the gas-tax increase they’re seeking to help renew the state’s Transportation Trust Fund, which is on course to run out of money at the end of June.

But others have voiced concern that the state simply can’t afford to repeal any tax at a time when, though circumstances have improved some, New Jersey still has significant fiscal challenges. In recent years, the state has not been fully funding its school-aid law or making the full contributions into the public-employee pension system. Funding for property tax relief programs has also remained flat even as the average property tax bill continues to grow.

More important issues?

Assembly Budget Committee Chair Gary Schaer (D-Passaic) just finished holding a series of public hearings on Christie’s proposed spending plan. A lot of people called for more spending on K-12 education and social-services programs. Only a few raised the issue of the estate tax during the hearings.

Schaer, speaking in Trenton last week during an event organized by New Jersey Policy Perspective, a liberal think tank, challenged those who want to see a tax cut to identify which program should get a corresponding reduction. New Jersey’s constitution, he reminded the audience, does not allow the state to run up a deficit.

“We can go over item after item after item,” Schaer said. “You can cut the tax, you can do that, but let me be clear . . . at some point we come to that bottom line figure of what it is we can afford to do or not do.”

According to a fiscal note prepared by nonpartisan legislative analysts for the bill that was passed by the Senate committee in February, the first step of the estate-tax phase-out would cost the state an estimated $120 million during the 2018 fiscal year. By 2021, the state would see a total of $550 million in lost revenue, the analysis said.

Schaer said that even a loss of $100 million would have big consequences for a state budget that has had trouble coming up with an extra $1 million in recent years for cancer research.

“The state is facing a crisis in so many areas,” he said. “The loss of $100 million would be catastrophic.”

New Jersey Policy Perspective has been pushing hard against getting rid of the estate tax this year. The group also disputes the conclusions by the New Jersey Business & Industry, saying other research indicates jobs and family reasons, and not tax policies, are dictating moves to other states.

Mostly benefits the wealthy

Sheila Reynertson, a senior policy analyst at the think tank, argues a repeal of the estate tax would mostly benefit the state’s wealthiest residents. But Reynertson said during the event last week that she also sees some merit in raising New Jersey’s estate-tax exemption a little higher, possibly to $1 million.

That might help the farmer or middle-class homeowner, she said.

“It would be great,” Reynertson said, before quickly adding, “But that is not the discussion we’re having right now.”

Reached later, Michele Siekerka, president of the business association, suggested her organization might also be willing to move off its position of seeking a full repeal of the estate tax. But she had a far higher figure than $1 million in mind.

Siekerka said the current exemption for the federal estate tax, which is set at $5.45 million for 2016, would be a better number to look at when considering where to set a new state exemption. At that level, New Jersey would match Delaware’s threshold, while moving ahead of New York, Connecticut, Rhode Island, Massachusetts and Maryland.

“There is something in between and that’s looking at the federal threshold,” Siekerka said. “It’s all about competitiveness with the states where people are going to.”

Research released last year by the nonpartisan New Jersey Office of Legislative Services sheds some light on how lifting the threshold to either $1 million or to over $5 million would impact both the state budget and those who are subject to the estate tax.

OLS studied data from the 2013 fiscal year, when 3,266 estates were taxed, generating roughly $325 million in revenue for the state.

At the lowest end of the scale, there were 1,298 estates worth between $675,000 and $1 million that were taxed by the state that year. They produced $28.2 million in revenue.

But the state generated $126 million from just 109 estates that were worth $5 million or more, according to OLS.

Original article