Here's a novel idea to help Governor Manchin and legislative leaders address WV's budget challenges...
Stop cutting taxes for dead millionaires!
According to the WV Center for Budget and Policy, WV could generate $21 million per year if WV restored our estate tax to 2001 levels. (PDF)
In 2001, West Virginia estates over $675,000 ( after deductions for funeral expenses and charitable donations) were subject to the Estate Tax, but that tax is being phased out and in 2010 will be eliminated completely.
According to the phase-out, in 2009 only those estates worth more than $3.5 million are subject to the estate tax.
(Don't worry millionaires, if you can hold on for just a few more months until 2010, then your children's inheritance will escape the tax completely. Whew!)
In the meantime, rather than having $21 million per year for things like early childhood programs, schools, health care, infrastructure, law enforcement, fire fighter pensions, etc., WV will have a whopping $0 in state revenue from the estate tax. (Seriously... $0. None. Nada. Zilch.)
At a time when our state is struggling to pay its bills and can't afford to invest in programs that will improve our state's future, I don't think it's wise to cut taxes for dead millionaires.
Let's do the right thing! Restore the Estate Tax to a reasonable level and use the revenue to support efforts that help ensure all WV children have the opportunity to be prosperous as adults - not just those fortunate enough to have wealthy parents.
Stop cutting taxes for dead millionaires!
According to the WV Center for Budget and Policy, WV could generate $21 million per year if WV restored our estate tax to 2001 levels. (PDF)In 2001, West Virginia estates over $675,000 ( after deductions for funeral expenses and charitable donations) were subject to the Estate Tax, but that tax is being phased out and in 2010 will be eliminated completely.
According to the phase-out, in 2009 only those estates worth more than $3.5 million are subject to the estate tax.
(Don't worry millionaires, if you can hold on for just a few more months until 2010, then your children's inheritance will escape the tax completely. Whew!)
In the meantime, rather than having $21 million per year for things like early childhood programs, schools, health care, infrastructure, law enforcement, fire fighter pensions, etc., WV will have a whopping $0 in state revenue from the estate tax. (Seriously... $0. None. Nada. Zilch.)
At a time when our state is struggling to pay its bills and can't afford to invest in programs that will improve our state's future, I don't think it's wise to cut taxes for dead millionaires.
Let's do the right thing! Restore the Estate Tax to a reasonable level and use the revenue to support efforts that help ensure all WV children have the opportunity to be prosperous as adults - not just those fortunate enough to have wealthy parents.
Cross posted at WVaBlue.com.
Comments
I appreciate your comments and perhaps I went a little too far with my hyperbole, but that's part of the point of Jonathan Swift-type "A Modest Proposal" essay.
It's just frustrating that lawmakers will perpetually object to funding requests for programs that affect children and families because "we can't afford it". Yet, they will pass a tax cut that costs $21 million/year without much of a thought.
Meanwhile that amount of money would pay for a statewide system of In-Home Family Education that the CDC estimates could reduce child abuse by 40%, but lawmakers say we "can't afford it"? How about a meaningful State Earned Income Tax Credit to reward work and help low income families? There are many options that are more important to the public's long-term best interests than phasing out the estate tax.
I understand that people are grieving when they lose a loved one, but when that person inherits $650,000 or $1 million or $3.5 million then they should pay at least the same tax that a low-income worker pays on their earnings.
Thanks,
Jim / Wabi-Sabi
I serve on the WVCBP board of directors, and I appreciate you bringing our paper on these budget issues into the conversation. A significant part of our mission is to make the case for tax policy directions in a nonpartisan, fact-based manner that demonstrates the common-sense options that can lead to a shared prosperity.
Interesting post, but I strongly disagree. The Estate Tax or for fear of hyperbole "Death Tax" is a terrible source of income for government/society.
I may write more later, but a few key points are:
1. The estate has been taxed already as the wealth was created by the departed person. Taxing again to me is unfair.
2. The estate tax hurts family run businesses. These estates are often family run business. The estate tax requires the heirs to come up with liquid assets which the business often does not have forcing either a high debt load or liquidation to pay a tax on wealth that has already been taxed.
3. Estate taxes encourage tax shelters, etc. to minimize estate sizes and avoid the tax which only benefits accountants and tax attorneys. On a state level or even national level people facing large estate taxes frequently change residency to avoid the tax.
4. In 2006 the Joint Economic Committee of Congress estimated the Federal Estate Tax has reduced the stock of capital in the economy by approximately $847 billion.
5. Lastly, if you insist on an estate tax, I would recommend an "inheritance tax" where the tax is based on the heir's tax situation rather than size of the estate. This could protect family business issues and I think be fairer.
There are better ways to accomplish your worthwhile goals.
Tom
$21 million dollars ain't chump change and I'm curious to see what the state plans to do when that fund dries up. Raise the food tax back up to 6%? Cut funding for roads and schools and other badly needed state services? Restoring the estate tax makes much more sense.