Mike Davis

@byMikeDavis

Legislators believe NJ's estate tax (over $675,000 in assets) is causing wealthy residents to leave.

The plan would increase NJ's gasoline tax 23 cents, from 2nd lowest to 7th highest in the U.S.

It eliminates the estate tax, raises EITC & retiree exemptions and gives tax breaks for contributions to NJ charities.

Critics say it's not "tax fairness," since the estate tax affects <1% of NJ's population and the gasoline tax affects everyone.

TRENTON – It's on the mind of each of Jack Oujo's clients: How do I get around New Jersey's estate taxes?

The tax, paid by inheritors on an estate valued at more than $675,000, has been cited by legislators and tax advocates as a driver that's pushing people out of the state. And it's easily avoided by buying a condo in tax-friendly Florida and moving there for exactly six months and one day.

“I’d never encourage a client to move to save on taxes, but a lot of clients feel like they’re being asked to leave the state when they reach a certain point in time," said Oujo, an accountant and financial adviser based in Wall. “It’s idiotic for New Jersey. It’s stupid."

MORE:Gas, estate tax plan advances

It's the last week of the fiscal year and state lawmakers are scrambling to pass dozens of bills, including a $34.8 billion budget and a proposed minimum wage hike. But none is more of a sticking point than Sens. Paul Sarlo, D-Bergen, and Steve Oroho's, R-Sussex, "historic" tax realignment, notably including a four-year phaseout of the estate tax.

But while the proposed cut in the estate tax only applies to people with assets worth over $675,000, it has been coupled with an increase in the state's long-dormant gasoline tax. Currently the second-lowest in the United States, it's in line for a 23-cent hike that will be felt by every New Jerseyan — and out-of-state visitor — who fills up here.

"The biggest issue is that fuel taxes are regressive. They will hit low-income and middle-income New Jerseyans the hardest," said Jon Whiten, deputy director of liberal-leaning think tank New Jersey Policy Perspective. "The estate tax is levied on people inheriting a pretty substantial amount of wealth.

"It's not even really an 'apples to oranges' thing. It's comparing apples to steaks. They shouldn't be part of the same discussion," he said.

Democrats have spent much of the last two years seeking a way to renew the $1.6 billion Transportation Trust Fund, which receives nearly half of its funding from gasoline and diesel taxes. The new tax of 37.5 cents per gallon would fund a boosted $2 billion TTF, used to pay for roads, bridges and mass transit, and likely cost the average New Jersey driver about $175 more a year, according to AAA Mid-Atlantic.

MORE: TTF has big needs, slack funding

Republicans in the Legislature have insisted on the tax cuts if they're going to support any gasoline tax hike. None has been more vocal about the trade-off than Gov. Chris Christie, who earlier this year said the Legislature was responsible for coming up with a plan that includes "tax fairness." The buzzword has been the governor's calling card over the last year, asking for a tax-neutral proposal.

If the bill passes the Senate and Assembly on Monday, Democrats say they plan to override an expected Christie veto.

"If they come to me with a plan that represents (tax fairness), I’ll consider it, but right now this does not," Christie said at a South Brunswick home on Thursday, the first stop on a pitch tour for another initiative — his new "Fairness Formula" school funding and property tax plan.

MORE: NJ says 'meh' to gas tax hike

"I have an open mind to work with them on coming up with a plan that helps to fund what people in the state want, which is better roads, better bridges, better mass transit.

"They also want tax fairness, and we can do it, but they are going to need to work with me to that," Christie said.

The Fairness Formula plan — which does not figure in this week's budget deliberations — would institute a flat per-pupil school funding formula that would slash aid to low-income districts and give it to more middle class or wealthy districts.

The 3,500

Over the last three years, only 94 estates — each worth about $5.3 million — made up an average of 41 percent of all estate taxes paid in New Jersey. But the bill sponsors insist the tax plan will make "New Jersey more competitive and retain income and capital."

Highlights of the Sarlo-Oroho tax plan include:

Eliminating the estate tax over a four-year period, raising the threshold gradually from $675,000 to $3 million until Jan. 1, 2020, when it will be completely eliminated.

Increasing the Earned Income Tax Credit from 30 percent to 40 percent of the federal level.

Exempting retirees from paying state income taxes on up to $75,000 of retirement income, or $100,000 for a married couple (up from $15,000 for single retirees or $20,000 for a married couple)

Allowing the deduction of charitable contributions to New Jersey charities from state tax returns.

"We need to restructure our tax system," Senate President Steve Sweeney, D-Gloucester, told the Asbury Park Press editorial board on June 10. "When people talk about the estate tax, in Bergen County, that's someone who owns a home. Our threshold is so low."

@ISSUE: Should NJ kill its estate tax?

Of the 15 states with an estate tax, New Jersey's threshold is by far the lowest. Most states have a $1 million threshold and Delaware has the highest threshold of $5.43 million.

But the Garden State is one of only two states with two separate death taxes, along with Maryland. In addition to the estate tax — based on the value of a New Jersey resident's assets — the state levies an "inheritance tax" if the assets are inherited by anyone except a spouse, child, grandchild, parent, charity or nonprofit. There is no $675,000 threshold on the inheritance tax.

MORE: Time to bury 'death taxes'?

The death taxes aren't exclusively reached by wealthy people, Oujo said: “The idea that you have to be rich to get over $675,000 is insane,” he said. “If you’re saving in a 401(k) over a lifetime and have a home with a paid-off mortgage, you’ll be over $1 million pretty easily.”

But New Jersey Policy Perspective says that less than 3,500 people were qualified to pay the estate tax over the last three years, less than 0.04 percent of the population. Legislative estimates link about $320 million in 2014 revenue to the estate tax.

If every New Jersey estate taxpayer attended a concert at the Stone Pony Summer Stage, there would still be room for another 1,000 people.

"Calling this 'tax fairness' is an insult to anyone who pays taxes," Assemblyman John Wisniewski, D-Middlesex, said last week. "This is a deal with the devil."

On the other hand, raising the threshold for the Earned Income Tax Credit would directly help out the low- and middle-income families most likely to use it, Whiten said. From fiscal years 2013 to 2015, an average of 524,000 people in the state claim the tax credit each year — more than 5.8 percent of the state's population.

Oujo — who identified himself as a high-income, moderate Republican whose estate is taxable — said he is against a complete elimination of the estate tax. Instead, he recommended New Jersey legislators raise the threshold to the federal standard of $5.4 million.

"I don’t think they have to eliminate it. I see no reason to end the estate tax. I think that's ridiculous too," he said.

Myth or migration?

The dialogue around the estate tax has been centered around “myth and anecdote" similar to Oujo's experience, Whiten said.

And while 2 million people did leave the Garden State between 2005 and 2014, nearly 549,000 of them went to states ranked in the Tax Foundation's top 15 highest-taxed states, according to New Jersey Policy Perspective.

The No. 1 destination? New York, the highest-taxed state in the country.

“A lot of people do leave because New Jersey is an expensive place to live – but most of the time, that’s property taxes or overall housing costs," Whiten said. "It’s a very, very slim minority of people who might say, ‘I’m going to leave because my inheritors are going to be subject to this estate tax.'"

INVESTIGATION: New Jersey's tax crisis

No exiting New Jerseyan's move has been more publicized than that of hedge fund manager David Tepper, formerly the wealthiest man in the state. Tepper declared himself a Florida resident as of this year, which forecasters estimated resulted in a $100 million shift in the state's income tax revenue.

But according to Bloomberg, tax planning was not the main factor in his move.

"A lot of people do leave New Jersey when they get older, and a lot leave for reasons that have nothing to do with taxes or cost of living," Whiten said. "They just want to move to Florida or North Carolina, somewhere where it's warm."

EDITORIAL: Gas tax for estate tax isn't 'tax fairness'

Mike Davis: 732-643-4223; mdavis@gannettnj.com