Estate Tax Targeted To Keep Capital In Massachusetts
A long-running debate over the state's estate tax revived on Beacon Hill as the Revenue Committee took up bills Tuesday calling for reforms or outright abolition of the levies charged when assets are passed along following a person's death.
As other states reexamine their estate taxes — only 12 others currently have one remaining on the books, and only Oregon's kicks in at as low a level — opponents of the current Massachusetts system want lawmakers to get behind some sort of action, even if the move would carry revenue implications.
"States are lowering or eliminating the estate tax across the country because they don't want to drive earners out of state," Massachusetts Fiscal Alliance spokesman Paul Craney, who cited changes in five states and the District of Columbia that have been made since he testified in favor of a change in 2013, said at a committee hearing. "In going against this trend, Massachusetts is skipping over the dollar to pick up the dime."
Ten different proposals on the estate tax, which opponents refer to as a "death tax," sit before the Joint Committee on Revenue. They range in scope from scaling the $1 million tax threshold up to scrapping it completely.
Most were filed by Republicans, but one (S 1713) that would index the estate tax to the consumer price index was written by Democratic Sen. Jason Lewis. A Republican Rep. Shawn Dooley proposal to increase the threshold has a handful of cosponsors from across the aisle.
Dooley's bill (H 2446) has been filed several sessions in a row, but has never been passed. It would increase the level at which the estate tax kicks in from $1 million to $2.75 million and add a homeowner exemption.
The Norfolk Republican told the committee that he does not want to see the estate tax repealed entirely, but rather modified to strike a middle ground between its financial benefits and the burden it places on residents who have assets — which includes property owned and, in some cases, retirement accounts and life insurance — between $1 million and $5 million.
With a threshold of $1 million, Dooley said, the state loses "tons of people every year" who move away to avoid having to pay. That argument is similar to one made about a proposed 4 percent surtax on household income above $1 million.
"This isn't a bill that's trying to help the ultra, ultra, ultra rich," Dooley said. "What this does is it's trying to help that person who has a triple-decker in Cambridge and owns a garage and maybe a little bit of a pension and a few stocks and a cottage down in Harwich, all of these things that he bought and lived a lifetime, never considering himself wealthy."
"All of a sudden, this person becomes, on paper, very, very wealthy, and this person just wants to pass it down to the next generation," Dooley continued.
Dooley told the committee that it is difficult to provide an exact figure on the revenue implications of updating the estate tax threshold. He said that, last year, the administration's Department of Revenue estimated the state would likely forego roughly $60 million in taxes under the change.
Craney said that MassFiscal supports eliminating the estate tax overall, but opted to endorse Dooley's bill — noting the broad support it enjoys — as a way that "starts getting us there."
Other business and interest groups renewed their advocacy Tuesday for significant changes to the policy. Brad MacDougall, vice president of government affairs for the Associated Industries of Massachusetts, also backed Dooley's legislation.
Citizens for Limited Taxation group supported the bill, too, but described other legislation (S 1657 and S 1731) that would completely eliminate the estate tax as the "cleanest, most straightforward" approach.
National Federation of Independent Business Massachusetts Director Christopher Carlozzi said in a press release that the organization supports either a repeal, phase-out or update to the policy.
"Massachusetts must finally recognize that the estate tax forces the families of deceased small business owners, especially farmers, to make difficult and often financially devasting business decisions," Carlozzi said. "Because so many of a business’ assets, like land and equipment, are illiquid at the time of an owner’s death, grieving relatives struggle and become overburdened when faced with hefty estate tax responsibilities."
Fiscal year 2019 estate tax collections exceeded the benchmark lawmakers set by $151 million, the Department of Revenue said in July.
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[Photo: Chris Lisinski/SHNS]