HOW WE LIVE

Outta here! Garden State residents look to retire in greener pastures

Jay Jefferson Cooke
@JayJCookeCNHNT
The Garden State
  • For more than a decade, New Jersey has had the highest death taxes in the nation
  • The Garden State is one of only two states (along with Maryland) that has both an estate tax and an inheritance tax
  • New Jersey currently allows residents age 62 older who make under $100,000 annually to exempt up to $15,000 of their retirement income from state income taxes
  • The exemption is capped at $20,000 for couples in New Jersey; Pennsylvania does not tax retirement income at all

Have you noticed more moving trucks on your block recently?

Well, here's why.

The recent National Movers Study released by United Van Lines pointed to New Jersey leading the way among all states and the District of Columbia for outmigration, with 67 percent outbound.

And according to several different studies and organizations, a major reason for this significant exodus is that many retirees cannot afford to live in New Jersey. The state also ranks among the worst states for retirees when it comes to tax policies.

For more than a decade, New Jersey has had the highest death taxes in the nation. The Garden State is one of only two states (along with Maryland) that has both an estate tax and an inheritance tax and, unlike most states, New Jersey never hiked its $675,000 exclusion to match the federal exclusion of $5.1 million, according to the New Jersey Society of Certified Public Accountants (NJCPA). A recent survey by the NJCPA found that 74 percent of NJCPA respondents actually have advised clients to relocate to another state because of New Jersey’s estate and inheritance taxes. A strong majority (85 percent) think these taxes impact the state’s middle class just as much as the affluent.

The relatively low retirement-income tax exemptions is another key factor in New Jersey’s poor ranking.

New Jersey currently allows residents age 62 older who make under $100,000 annually to exempt up to $15,000 of their retirement income from state income taxes. The exemption is capped at $20,000 for couples in New Jersey. The cap is $40,000 in New York, while Pennsylvania does not tax retirement income at all.

“The tax policies in our neighboring states offer a real temptation for seniors to leave New Jersey,” said NJCPA CEO Ralph Albert Thomas. “Keeping New Jersey retirees in New Jersey by providing tax-fairness measures is critical to helping improve the state’s economy and business climate.”

To be sure, New Jersey retirees have many things to consider and many challenges facing them.

Jeannette E. Brown, a Hillsborough resident, is a retired research chemist and author of a book about African-American women chemists. Brown is concerned about the expense of living in the Garden State as a retiree.

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“I can hardly afford my real estate taxes and make too much for exemption,” Brown said. “Many retirees have been retired from corporations before they wanted to retire. If they have a pension, it may not be enough along with Social Security for them to live in New Jersey because of the high cost of living. Younger retirees may not have a pension but many not have saved enough in their 401(k) in order to retire, especially if they were forced to take early retirement.

“I know a woman who is in that state and is too young for Social Security, but the money she has from her former employer is not enough to live on," Brown addeed. "She is trying to find another job, but people do not want to hire her because of her age. She does not have enough money to rent an apartment as apartment rents are high in New Jersey.”

High property taxes are a significant problem for Brown, who has specific complaints about how politics have affected the climate in the state.

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“Since I own my home, I now have to pay the property tax on the home. When the mortgage was paying the tax, it was part of the mortgage payment and I did not feel the cost. Now that I have to pay it, the cost keeps going up but my income does not," Brown said, adding: “I make too much money for the Homestead rebate program. Anyway, that program is for the taxes that were paid two or more years previously. Our governor even delayed the payment from one year to the next year and yet he vetoed the tax on the rich. That is taking money from the poor instead of the rich. Many of the people in my church will move to other states because of the problem with the taxes. They say to be near their children but also because of the taxes.”

Brown feels steps need to be made to make New Jersey more affordable for retirees.

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“Maybe there should be more discounts for seniors,” she said. “Hillsborough has a program where seniors who exercise at the senior center can get free access to the YMCA. That should be for all seniors or for seniors over the age of 80 who attend the Y regardless of whether they exercise in the senior center. Somerset County and Hillsborough have buses that take people shopping or to the doctor. I do not know if that is for all counties. The buses should also be able to cross county lines — in other words, make them statewide. Many people want to age in place so that services both public and private should be available to them.”

NJCPA CEO Ralph Albert Thomas

A variety of issues

"Health problems and consumption of health-care services increase dramatically with age, and since we are living longer in retirement, the more imperative it is to have easy access to health-care services and facilities. That factor weighs heavily on retirement location decisions,” said James W. Hughes, distinguished professor and dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

Hughes has stated that for seniors and retirees, it is simple to cash out of high-value New Jersey housing and secure much more affordable (and newer) housing in other states.

“New Jersey has some of the highest house values/prices in the country and the highest home-ownership costs. This may inhibit savings. At the same time, many New Jerseyans see their home equity as their super retirement piggy bank when they decide to sell and move to a more affordable state,” Hughes said. “The state’s death taxes (estate and inheritance) need to be reviewed as they now stand as a strong incentive to retire outside of New Jersey."

Most experts say that access to the best possible health care is a critical consideration for most retirees. The low ranking in health-care facilities per capita may give pause to many. But New Jersey prides itself on its hospitals and health-care facilities.

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“New Jersey health care is second to none, but getting to it is another matter,” said New Jersey Assemblyman Jack M. Ciattarelli, R-16th District, which includes parts of Mercer, Middlesex, Hunterdon and Somerset counties. “In a sprawl state such as New Jersey it is particularly challenging. The consequences of sprawl are not easy to solve or inexpensive. Somerset County has done a good job of providing transportation services (to seniors and other residents to most of the county), but even that system cannot serve everyone perfectly.”

New Jersey Assemblyman Jack M. Ciattarelli, R-16th District

Ciattarelli points out that retiree needs are diverse and many elements must be considered to make an informed decision on where to live, how to live and how to prepare.

“It really is not surprising (that New Jersey is ranked among the worst state for retirees). New Jersey is one of only two states with an estate tax and inheritance tax,” Ciattarelli said. “This is in addition to ever-increasing property taxes, which are most punitive to those on a fixed income. We must work to make a New Jersey a better place to live, work and most importantly to retire.”

Ciattarelli said that property taxes certainly are a contributing factor to outmigration, which seems is trending upward in senior citizens.

State Senate President Stephen Sweeney, D-3rd District, told a Gannett New Jersey editorial board that lowering the property tax burden requires good decisions about sharing services by counties, municipalities and school districts and that the state’s affordability issues are broader than property taxes.

“Property taxes are right up there. They’re right at the top, and fixing the school funding formula or at least redistributing the aid will assist in that,” Sweeney told Gannett New Jersey.

“Consolidation and regionalization are some of the keys to solving property-tax crisis — but they are not the only things. Up until recently, the senate president seemed to be in denial about outmigration. His acknowledgment that property taxes are a priority and school funding formulas need to be fixed is a positive sign,” Ciattarelli said, adding that “the affordability issue, specifically property taxes, is critical to seniors. One solution would be an increase of assisted-living facilities and 55-plus communities.”

If those and other programs do not help significantly, “we may need more drastic measures," Ciattarelli said, "such as a measure similar to California Proposition 13 (officially named the People's Initiative to Limit Property Taxation),” which limited ad valorem tax on real property. “We may need a referendum to freeze property taxes for all seniors who reach the age of 65,” Ciattarelli said.

A safety net?

Even with years of recessions and downturns since the original Social Security Act was signed into law by President Franklin D. Roosevelt in 1935, many people approaching retirement have little except anticipated Social Security to provide income during retirement.

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“It’s certainly possible that some people do not realize that Social Security was intended to be supplementary retirement income, but many New Jerseyans are simply straddled with high taxes and a high cost of living, which prevent them to adequately save for retirement,” said Erica L. Jedynak, state director of Americans for Prosperity — New Jersey. “Many baby boomers are sandwiched between taking care of elderly parents and helping to pay for their children’s college education, both costly undertakings.”

Erica L. Jedynak is state director of  Americans for Prosperity Foundation – New Jersey

According to Jedynak, cost of living in the state also is a factor in the difficulty of saving for retirement.

“In order for New Jersey to become more affordable for retirees — and really all New Jerseyans — we must pursue policies rooted in economic freedom,” Jedynak said, adding: “States which are more economically free — that is, they have lower taxes, less spending and a much more welcoming business climate — are much likelier to be prosperous and have higher living standards. Therefore, it is essential for lawmakers to rein in New Jersey’s budget and to work to provide significant, across-the-board tax relief to all of our residents and business owners. This includes addressing the inequitable distribution of state aid to schools which is the primary driver of high property taxes in New Jersey.”

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Pazetta Scott, a retiree and former New Jersey resident who was the owner of the former Lip's Lounge, a Somerville bar and restaurant, now lives in Texas.

"I had to move from Somerville because I couldn't afford the property taxes and high sewer bills," Scott said. "The available rental property was too expensive. When I moved to Somerville in 1967, they were going to build low-income housing — they moved people out of town and the houses have never been built. The apartment homes being built in Somerville are certainly not affordable. I loved that town and really didn't want to relocate. I'm sure I'm not alone."

Scott's sentiments are echoed by many in the state. Last month, testimony about the need for more affordable housing options for working-class and low-income residents in New Jersey was given by individuals and organizations.

The concerns were addressed by Assemblyman Jerry Green, D-22nd District, chairman of the Housing and Community Development Committee.

“We cannot address poverty without addressing the high cost of living and the shortage of affordable housing in New Jersey, and how this keeps low-income families in a perpetual state of survival," Green said. “We have the highest property taxes in the country and rank fifth in the nation for high rents. Unless we take action and turn this around, the future of our state is grim.

Assemblyman Jerry Green organized a toy drive throughout Union County and a holiday party for disadvantaged people on Sunday, Dec. 11.

“That is why hearing directly from individuals and organizations — that are working diligently to make New Jersey a more equitable place for all residents, was so important. The input provided today will be essential as we take heed of the task in front of us, and begin working on legislation to tackle New Jersey’s high cost of living, and ensure working-class and low-income families have more affordable housing options.”

Green and state Sen. Raymond Lesniak, D-20th District, last week announced an affordable housing initiative that would utilize tax incentives to help increase the construction and availability of low- and moderate-income housing. Joined in support by housing advocates, the legislators said they are introducing legislation, S-894, that would provide up to $600 million in tax credits to build affordable housing.

“Since the recession, our economy has struggled to rebound like other states and more and more New Jersey families are struggling to get by,” Green said.  “The need for quality, affordable housing for low and moderate income families has never been more pressing.  This tax incentive program is designed to entice developers to invest in our most distressed communities, which will in turn stimulate job creation and ultimately boost the quality of life for both families and the communities in which they reside.”

“This bill will incentivize the development of affordable housing,” said Lesniak. “It will rebuild neighborhoods and spur investment in communities. We need to transform cities from areas with just offices to communities with robust residential populations that are alive with activity seven-days per week.”

Limited choices

As far as seniors, many do not have the choice of staying in the homes that they sometimes have been in for a significant amount of time. With dense populations, limited available lands for development and strict governmental regulations, older residents, including retirees, sometimes have few options in the communities they call home.

"It is a housing-diversity supply problem as it is an affordability problem," said Tim Evans, director of research for New Jersey Future, a nonprofit, nonpartisan organization that brings together concerned citizens and leaders to promote responsible land-use policies. "New Jersey is a particularly expensive state not just for older people, but for all people. New Jersey is not able to add housing units to keep up with demand. There is an undersupply of housing in the state, which drives up  prices."

Tim Evans is director of research for New Jersey Future

New Jersey Future's stated mission is to employ original research, analysis and advocacy to build coalitions and drive land-use policies that help revitalize cities and towns, protect natural lands and farms, provide more transportation choices beyond cars, expand access to safe and affordable neighborhoods and fuel a prosperous economy.

A recent study by the organization, Housing Affordability and Aging-Friendly Communities, identifies two primary types of places where high percentages of older residents have difficulty paying their housing costs:

  • Lower-income communities. These are places with high rates of housing cost burden for all residents, regardless of age. They are primarily places where limited incomes create difficulties in paying for housing of any type. They also tend to have good aging-friendly design characteristics, and include a few higher-demand walkable communities such as Englewood, Morristown, Bergenfield, Somerville and Nutley.
  • Single-family-dominant communities. These are places where housing cost burden is a more acute problem for older households than it is for others. They tend to be lower-density, auto-dependent suburban areas where the built environment is not particularly aging-friendly, and they tend to be dominated by large single-family detached homes, a housing type not well suited to older people seeking to downsize and reduce expenses and maintenance responsibilities.

Many of those residents are faced with very tough choices regarding where to live. Until progress is made on tax, housing and other issues, people and most especially seniors, will continue leaving.

"With property taxes in Pennsylvania and Delaware much lower, the exodus will continue," said Dennis Durkin, a former New Jersey resident who now lives in Rehoboth Beach, Delaware. "I left in June 2012. My property taxes in Delaware on a similar size house of similar value are 8 percent of what they were in New Jersey."

Jay Jefferson Cooke is columnist/senior reporter for the Courier News, Home News Tribune and MyCentralJersey.com. Phone him at 908-243-6603; email: jcooke@gannettnj.com or write to: 92 E. Main St., Somerville, NJ 08876. Twitter: @JayJCookeCNHNT. Facebook: www.facebook.com/jayjefferson.cooke