![]() ![]() The estate tax is paid by estates based on the net value of its assets on the day of the death the inheritance tax is paid by individuals who receive gifts from estates. In New Jersey, very few heirs pay these taxes on inherited wealth: about 5 percent of heirs pay the estate tax, and about 5 percent pay the inheritance tax – and many pay both, so overall fewer than 10 percent of heirs pay these taxes. And 15 of the 18 states have a higher median household income than the country as a whole. In fact, 4 of the 5 states with the highest median household income, and 4 of the 5 with the highest share of millionaire households, tax inherited wealth. States that tax inherited wealth include – not surprisingly – most of the country’s wealthiest states. levy either an estate tax, an inheritance tax or both. For decades New Jersey has done just that by levying both an estate tax and an inheritance tax and using the revenue for assets like public colleges, safe communities and health care that benefit everyone.Ĭurrently, 18 states plus D.C. One of the most effective ways to promote widespread prosperity is to tax inherited wealth. A lopsided gain on that scale hasn’t been seen in New Jersey since the Gilded Age in the 1920s. The income of the richest 1 percent of households in the Garden State grew 190 percent between 19, while everybody else’s income grew just 20 percent. And these figures significantly understate the disparity, because they don’t include income from capital gains – which go disproportionately to the richest households. New Jersey has the seventh widest income gap in the country, with the wealthiest 5 percent of households earning an average of 16 times more than the poorest 20 percent, and an average of five times more than the middle 20 percent. Īnd New Jersey is among the states where this trend is most pronounced. ![]() economic growth by more than 20 percentage points from 1990 to 2010. This has made it harder for most families striving to get ahead and put a strain on future economic growth. In fact, these widening disparities have been responsible for having depressed U.S. This targeted tax policy can help close the wealth gap in the long run by facilitating crucial investments that can boost all New Jersey families – not just those that pass millions of dollars down from one generation to the next.ĭecades of uneven income and wealth growth have put the wealthiest residents miles ahead of everyone else. One of the most effective ways to do so is to restore fair and adequate taxation of inherited wealth. Elville and Associates, P.C.To read this report as a PDF, click here.Īs wealth and income gaps between average New Jerseyans and the state’s wealthiest households continue to grow, policymakers must take steps to address this extreme inequality. Treasury, Mark Mazur, stated that wealthy taxpayers have been using aggressive tax planning tactics to artificially lower the value of their assets. Mazur asserted that the "Treasury’s action will significantly reduce the ability of these taxpayers and their estates to use such techniques solely for the purpose of lowering their estate and gift taxes." The Treasury Department is soliciting comments on the new regulations for 90 days. A hearing on the regulations is scheduled for December 1, 2016, and the rules may be finalized by the end of the year.Īuthored by: Stephen R. Treasury Department has proposed new regulations designed to prevent wealthy families from taking advantage of a long-utilized estate tax loophole. The regulations affect families that are passing on family businesses. In order to avoid paying estate tax - which applies only to estates valued at (in 2016) more than $5.45 million per individual or $10.9 million for a married couple - some wealthy families put their assets in a limited liability corporation (LLC). Under current law, if the decedent has gifted minority partnership interests in the business entity to his or her heirs, the value of the decedent's share can be discounted upon transfer to the estate. This can bring the decedent's combined assets to below federal estate tax thresholds. The proposed regulations are meant to prevent these valuation discounts by changing the treatment of certain lapsing rights and of restrictions on liquidation. In a blog post, the Assistant Secretary for Tax Policy at the U.S. ![]()
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