State lawmakers are taking first steps toward two tax cuts, though the changes appear unlikely to become law unless drivers also start paying more for gasoline.

The Senate Budget and Appropriations Committee on Monday advanced bills that would cut taxes on well-to-do estates and retirement income. Those ideas have been floated as potential trade-offs for an unpalatable solution for refinancing the Transportation Trust Fund, most likely a higher gas tax.

“I hope today is a signal to everyone, including the administration (of Gov. Chris Christie) and others, that the Senate is serious about working with the administration and Treasury on tax fairness, looking to renew the Transportation Trust Fund,” said Sen. Paul Sarlo, (D-Bergen), the budget committee chairman.

Sen. Bob Smith, (D-Middlesex), voted for the bill but said he wouldn’t support the estate-tax cut on the Senate floor unless it was specifically tied to the legislation that provides a way to pay for road, bridge and rail projects starting in July. He said he has concerns about the tax cut but also wants a TTF solution.

“We are at that stage in the Transportation Trust Fund that if something doesn’t happen quickly, our state, with all the problems that it has now, are going to be multiplied by a factor of 10,” Smith said.

Four Democrats voted to abstain, rather than support or oppose, in the vote on the estate-tax cut. A steady stream of liberal advocacy groups had made the case that a cut to a tax paid by just 4 percent of estates is irresponsible, particularly in exchange for a gas tax that would affect drivers of all incomes.

“We cannot afford right now to give away another tax break to the very wealthy, in exchange asking every single New Jerseyan to make due with less,” said Analilia Mejia, executive director of the New Jersey Working Families Alliance.

“What’s worse: This proposal is being considered in the midst of a modern-day Gilded Age,” said Sheila Reynertson, senior policy analyst for New Jersey Policy Perspective, who said income equality in the state is at its highest level since the 1920s.

Nonpartisan budget analysts for the Legislature estimate the estate tax cut would lead to a loss of around $550 million a year in estate-tax revenue once it is fully phased in.

The current exemption of $675,000 would increase to $1 million in January 2017, then grow to $2.5 million in 2018, $3.5 million in 2019 and $5 million in 2020 before the tax is abolished entirely in 2021.

The impact on state coffers would similarly grow over time: $120 million in fiscal 2018, $245 million in 2019, $300 million in 2020, $365 million in 2021 and then roughly $550 million a year after that. Those numbers are difficult to predict, officials said, as estate values are affected by things such as the value of stocks.

Sen. Steve Oroho, (R-Sussex), said the tax reduction will pay for itself “many times over” if fewer people move out of the state to plan retirement and business succession. He said IRS data that tracks movement by tax filers shows $19 billion in income has left New Jersey in the last 10 years.

“And when you look at it year by year, it’s accelerating,” Oroho said. “When you ask about how to pay for it, well quite frankly I think we’ve already been losing money because of it.”

Three-quarters of certified public accountants said in a survey last year by the New Jersey Society of CPAs that they have advised clients to move from New Jersey due to the state’s estate and inheritance taxes.

Michele Siekerka, the president of the New Jersey Business & Industry Association, said phasing out the estate tax “can help to stop and quell the outmigration.”

“Those who had the ability to leave in order to avoid the taxes in this state move to other states that have more favorable tax benefit, in particular for estate tax. What happens when someone leaves the state of New Jersey and what they take with them,” she asked.

The Senate Budget Committee also advanced a second tax cut: a gradual increase in the amount of pension and retirement income that would be exempt from income taxes. Currently $15,000 for an individual and $20,000 for joint filers, it would grow over three years to $75,000 for individuals and $100,000 for joint filers, if the bill becomes law.

Nonpartisan analysts projected that bill would save older taxpayers, but cost the state treasury, up to $90 million the first year, $115 million the second year and $125 million the year after that, followed by increases of up to 4 percent a year.

Neither tax cut makes sense at a time the state can’t afford to make even the partial payments to the public workers’ pension funds required by state law, said Ginger Gold Schnitzer, director of government relations for the New Jersey Education Association.

“More than our retired members need tax cuts on pensions, they need to be sure that their pensions are going to be there for them in the first place,” Schnitzer said. “What good is an exclusion from taxes on pension income if they have no pension at all?”

Changes to the estate tax aren’t being considered for the other so-called ‘death tax’ levied by New Jersey – the inheritance tax, which is levied on some people who receive assets from a person who dies. Direct relatives are exempt, but for others the tax kicks in at as small as a $500 inheritance.

“I would even say someday that we should look at the inheritance tax,” said Sen. Jeff Van Drew, D-Cape May. “The inheritance tax is a grossly unfair tax, particularly to people that are on the lower end of the income scale, as well.”

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