Politicians from both sides of the aisle in Trenton have finally reached an agreement to replenish the Transportation Trust Fund after many delays. While all residents of the Garden State won’t be impacted the same, the implications will be far-reaching nonetheless. The new deal confirms a 23-cent hike in the gasoline tax, which on top of the current 14.5 cent/gallon tax – brings this tax to 37.5 cents per gallon, up to the seventh-highest in our country.
For wealthy individuals and families, a key tax cut will come in the form of better treatment for when they transfer their estates. Annually, approximately 4% of estates are impacted by the state’s estate tax, which hits estates totaling more than $675,000. This limit would increase to $2 million by the start of 2017 before fully dissolving by January 1, 2018. Many critics have pointed out this tax as a major reason for wealth leaving New Jersey.
While Governor Christie also wanted to lower the state’s sales tax from 7% to 6%, the reduction on this tax will be less pronounced. The sales tax will only fall to 6.875% on Jan. 1, 2017 and then to 6.625% on Jan. 1, 2018.
While these points received the most press, there were some other items worthy of mention in this deal. The working poor should expect to get a larger tax credit, as the Earned Income Tax Credit will see a slight increase from 30 percent to 35 percent of the federal limit.
Retirement and pension income will also see an increase in the taxable threshold; the state currently taxes retirement income over $20,000 for couples filing jointly, $15,000 for single filers and $10,000 for those who are married but file separately. Under this new agreement, the income threshold increases so that income below $100,000 would become tax free for couples filing jointly, $75,000 for single filers, and $50,000 for those who are married but file separately. These changes would be phased in over the next several years.
Finally, the deal will also make honorably discharged veterans eligible for an income tax exemption.
When you think of paying more at the pump, remember that the deal involves more than just this new tax. Although prices at the pump might be going up, there are going to be cuts in other areas that might save you money in the end.