Governor Christie Signs New Bill
On Friday, October 14, Gov. Chris Christie signed a bill raising the gasoline tax 23 cents per gallon. The legislation also increases the retirement income tax exclusion along with eventually eliminating the estate tax, increasing the Earned Income Credit for the working poor, decreasing the sales tax rate by three-eighths of a percentage point, and creating a tax deduction for veterans.
The hike in the gasoline tax will be the state’s first increase since 1988. The 23-cent gas tax increase, along with increases in diesel fuels and non-motor fuels, will produce $1.23 billion annually to finance an eight year, $16 billion transportation program. Some Republican senators oppose the deal because they believe the gas tax increase ignores the concerns of New Jersey drivers, who, according to AAA, will pay an average of $170 in additional gasoline taxes annually. The new, higher price will take effect November 1.
In a move to help the state’s seniors, the retirement income exclusion has been increased substantially. Currently, married couples filing jointly can exclude their first $20,000 in retirement income from state tax. Under this new law, the limit for a married couple filing jointly will jump from $20,000 to $40,000 in 2017, to $60,000 in 2018, to $80,000 in 2019 and $100,000 in 2020. For a married person filing separately, it will gradually increase from $10,000 to $50,000, and for an individual filing as a single taxpayer, from $15,000 to $75,000. It is the hope that the increase in the retirement income exclusion will help stem the flow of middle class flight. Lawmakers from both parties have made similar arguments against the current retirement tax as forcing retired workers to move away from their families in favor of lower taxes.
The legislation would also phase out New Jersey’s estate tax, changing the threshold to $2 million in 2017 from the current $675,000 limit and eliminating it entirely in 2018. Some lawmakers believe that by doing away with the estate tax some residents will be more inclined to stay in New Jersey; keeping their wealth in the state as well.
The deal would also raise the state’s Earned Income Tax Credit, which helps low-income residents, from 30 percent to 35 percent of the federal limit. Additionally, the sales tax rate would decline to 6.875% from 7% by January 2017 and to 6.625% by July 2017.
