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To Live and Die in Tennessee
Governor Haslam now endorses death-tax repeal.
More good news from the states. After our Saturday editorial on states eliminating the death tax, Tennessee Govenor Bill Haslam called to say he has seen the light and favors doing the same in the Volunteer State. He had campaigned in 2010 to repeal the tax but once in office he got worried about the revenue loss. Then this week he sealed a deal with the GOP state legislature to phase out the 9.5% estate tax entirely over four years.
“The evidence is clear that the tax makes Tennessee uncompetitive and moves capital out of the state,” Mr. Haslam says. He’s right. State death taxes are economically self-defeating because tax return data confirm that the wealthy in America often arrange to die tax-free in states like Florida or Texas.
Advocates say death taxes break up family dynasties and prevent a class of trust-fund babies who live idly off inherited wealth. In reality, most revenue from the tax doesn’t come from $1 billion or even $100 million fortunes; those families have lawyers to keep the IRS away.
- A version of this article appeared March 31, 2012, on page A12 in some U.S. editions of The Wall Street Journal, with the headline: To Live and Die in Tennessee.
Most of the money is snatched from those who die with assets of less than $10 million. The average taxable estate in Tennessee is $4.5 million. After a life of hard work and savings, this level of assets hardly makes one a malefactor of great wealth. Family farms and businesses that a parent wishes to pass on to a son or daughter can be devastated by the tax. It’s not uncommon for family-owned businesses to be sold at auction to pay the federal and state estate-tax bill. Could there be anything more un-American?
As is true in most states with the tax, Tennessee’s estate and gift tax is fiscally trivial, raising only 1% of state revenue. Even on static terms the $75 million or so raised each year won’t be missed in Nashville, but a study by Laffer Associates finds that when taking into account the flight of capital and families, state and local governments in Tennessee lost $7 billion in sales, income, property and other tax revenues over the past decade.
Nashville has never imposed an income tax, so by abolishing the estate tax Tennessee will make itself even friendlier to investment and to retirees who might otherwise flee to Naples or Palm Beach. The wonder is that 20 states still impose this unfair and counterproductive tax.
Death tax defying – The Wall Street Journal editorial
While Washington continues to debate what to do with the federal death tax — the top rate is now 35 percent and is scheduled to rise to 55 percent next year — states are starting to recognize that their high estate taxes are a good way to chase away wealth producers. Last year Ohio abolished its estate tax, joining the 28 other states that do not impose such a tax at death. The left has long been flummoxed by polls showing that roughly two of three Americans want this tax abolished. Americans instinctively understand that the tax is unfair. It punishes a lifetime of thrift and investment solely due to the accident of death. And it does so in a way that imposes another tax on income that in most cases has already been taxed once, or sometimes twice. View Full Article.
Estate Tax Report
Connecticut Department of Revenue Services
Connecticut Office of Policy and Management
February 1, 2008
Summary:
Connecticut had a net loss in migration from the period of 2002-2006. They sent out a survey in 2007 to practitioners in the legal, accounting, and estate planning fields. Their surveys (166 responses) reported that 52.6 percent of the clients of the practitioners had left the state primarily due to the Connecticut Estate tax, and 76.9 percent reported that their clients had changed domicile at least in part due to the Connecticut Estate Tax.
Connecticut was not alone in experiencing this trend. Comparing all states that had an estate tax to those that did not have an estate tax from the period of 2004-2007, the states without an estate tax experienced greater annual percentage growth as follows:
| States without estate taxes | States with estate taxes | |
| Employment | +2.17% | +1.07% |
| Personal Income | +6.07% | +5.05% |
| Real Gross State Product | +3.20% | +2.24% |
“Leaving Rhode Island” Policy Lessons from Rhode Island’s Exodus of People and Money
Ocean State Policy Research Institute
January 2011
Summary:
Rhode Island has the 3rd most punitive estate tax in the country. This contributes to the out-migration of people and wealth. In Rhode Island, the people who are leaving tend to be the wealthier people in the state. In 2004, when the US tax policy changed with regard to tax credits for state estate taxes, some states kept a state estate tax (such as Rhode Island), while other eliminated their state estate tax. After this point, the out-migration of Rhode Island accelerated. Rhode Island’s average income out-migration became much more pronounced in 2004, going from an average of $580,934,000 (1995 to 2003) to an average of $833,992,000 (2004 to 2007). This is a significant loss of income.
Moreover, while Rhode Island collected $341.3 million in estate taxes from 1995 to 2007, they lost $540 million in other taxes due to out-migration.
Ohio’s Estate Tax:
Ohio passed legislation which eliminates Ohio’s estate tax, effective January 1, 2013. This was given a delayed implementation date because the current budget in Ohio, which includes estate tax allocations to counties and cities, relied on continuing estate tax collections. In terms of Ohio’s reasoning for elimination of its estate tax, Sponsor Testimony made reference to the “Leaving Rhode Island” article, but made no reference to any Ohio studies conducted. This suggests that they relied on previously completed studies to make their determination. Outside commentary (after the repeal), also referred to the Connecticut Estate Tax Report.
American Family Business Foundation Unveils Report on Impact of Oregon’s Estate Tax
Report Reveals That Removal of Tax Encourages Revenue, Job Growth
WASHINGTON, D.C. – The American Family Business Foundation (AFBF) yesterday released a dynamic report on the economic impact of repealing Oregon’s estate tax. Following the release, Dick Patten, President of the American Family Business Foundation, stated:
“There’s a new fairness movement arising across America. After Ohio’s estate tax repeal and recent actions by Indiana’s legislature to repeal their inheritance tax, Oregon is the next State aiming to give family businesses a fair shake at growth by eliminating its death tax. We’re proud to release this critical report that highlights the benefits of eliminating a tax that on hampers economic growth and public revenue for Oregon.”
The report, Oregon’s Death Tax: An Impediment to Economic Growth, In-Migration, and Public Revenue, complied by Dr. Eric Fruits, an economics expert at Portland State University, and Dr. Randall J. Pozdena, a Portland-based economic consultant, measures the impact of eliminating Oregon’s estate tax on the State’s economy through an analysis of employment growth, income growth, and migration patterns. The report presents the impact of an elimination of Oregon’s estate tax under two scenarios: (1) the elimination of the estate tax in its entirety in 2013 and (2) a phased elimination of the tax over a 3-year period beginning in 2013. In sum, the report reveals that by 2017, a full repeal of Oregon’s estate tax will lead to:
- increased Oregon employment by 44,500 new jobs.
- increased personal income of Oregon’s residents by $2.4 billion.
- increased Oregon income tax collections exceeding the loss of estate tax revenue.
More specifically, the repeal increases Oregon’s tax collections by:
- increasing the net number of returns filed by 3.6 to 4.1 percent.
- increasing the associated Adjusted Gross Income by 2.4 to 4.1 percent.
- increasing the taxpayer base (measured by exemptions filed) from 3.8 to 4.3 percent.
Overall, the report presented by AFBF reveals that Oregon’s economy is strengthened by estate tax repeal. The elimination of the tax provides more incentives for existing Oregonians to save and invest more in their local economy, which creates jobs, bolsters personal income, and supports greater revenues for public services. The report also highlights the fact that removal of the tax will also encourage Oregonians to stay in the State.
AFBF is the lead organization in Washington, D.C. that conducts studies, research and analysis to educate the public about the implications of public policy for family-owned businesses and farms.
Oregon’s Unemployment Rate: Going Down or Giving Up?
For more information, visit http://www.oregontransformation.com
The Oregon Employment Department reported Tuesday that Oregon’s unemployment rate is now 9.1%. This percentage is reported as the lowest unemployment rate this state has seen in the past three years.
A reason to celebrate? Not exactly. The Employment Department also reported that Oregon lost1,600 jobs last month (seasonally adjusted). If the facts don’t seem to add up, the chart below may help explain:
Source: Oregonian
This chart suggests that the reason our unemployment rate went down is because more Oregonians have become discouraged and have given up looking for a job.
So is Oregon unique? How do we compare with our neighbors?
Here’s one report out of the state of Washington this week:
“Private-sector job growth has pushed Washington’s unemployment rate to the lowest point since February 2009, officials said Wednesday. The November jobless rate of 8.7 percent was down from 9.1 percent in October, according to the Employment Security Department. The state added some 12,100 jobs — more than any month since the official start of the recession at the end of 2007.”
What is Oregon doing to support its private sector?
Find this article on our website at http://www.oregontransformation.com/2011/12/16/oregon%E2%80%99s-unemployment-rate-going-down-or-giving-up/
Sources: http://www.oregonlive.com/business/index.ssf/2011/12/oregon_jobless_rate_holds_lead.html, http://www.qualityinfo.org/pubs/pressrel/1211.pdf, http://www.seattlepi.com/news/article/Wash-jobless-rate-at-8-7-pct-lowest-since-2009-2402627.php