- Associated Press - Monday, February 29, 2016

TRENTON, N.J. (AP) - The first piece of a bigger plan aimed at cutting New Jersey residents’ retirement income and estate taxes while shoring up a depleting transportation fund through higher gas taxes advanced in the Democrat-led Legislature on Monday.

The state Senate Budget Committee approved legislation that would phase in a retirement income-tax exemption of up to $100,000 for couples over three years and a separate bill that would phase out the estate tax over five years. New Jersey’s estate tax has the lowest threshold in the country at $675,000.

But Republican Gov. Chris Christie said on a radio call-in show that as far as he’s concerned there’s no link, but didn’t rule out cuts for an increase in the gas tax.

The bills advanced separately from any legislation hiking the gas tax, as some Democrats have called for, but lawmakers made it clear that the legislation is an effort to gain support from Christie for such legislation. Christie has repeatedly called for “tax fairness” to be a part of any solution on the transportation trust fund, which has more than $16 billion in debt and runs out of capacity for new borrowing by June 30.

A look at the tax issues and how they could affect transportation:

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WHAT’S THE CONNECTION BETWEEN TAXES AND ROAD FUNDING?

The legislation is a step toward connecting the transportation trust fund with tax cuts, which Christie has effectively set as the cost of raising the state’s 14.5-cent gas tax. Democratic lawmakers are hopeful the bills that advanced Monday could achieve a long-elusive deal on the fund.

“I hope today is a signal to everyone that the Senate is serious about working with the administration and Treasury on tax fairness,” Democratic state Sen. Paul Sarlo said.

Christie said Monday on his radio call-in show Democrats should put a proposal fixing the transportation trust fund on his desk.

“If they ever put something up I’ll react to it. I’m certainly not gonna do it in a vacuum,” he said.

The governor called for repealing the estate tax in his January State of the State address.

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WHAT’S THE NET EFFECT OF THE LEGISLATION?

Exactly how the cuts would play out is contested. The bills’ sponsors and business groups argue that besides allowing residents to keep more money in their pockets, the legislation would stem the flow of outward migration from New Jersey to states like Pennsylvania, New York and Florida, which have more favorable tax climates.

New Jersey Business and Industry Association President Michele Siekerka says the state lost about $10 billion in income over 10 years because of residents leaving the state in retirement. Eliminating the estate tax, more than cutting retirement income, earned criticism. New Jersey Policy Perspective, a liberal-leaning think tank, argued the measure comes at the expense of programs to help poorer residents. “Eliminating the estate tax means protecting inherited wealth,” NJPP senior analyst Sheila Reynertson.

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WHAT’S NEXT?

The bills now move to the Senate floor for consideration. Messages left with the Assembly speaker have not been immediately returned.

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