Paul L. Caron

Sunday, October 27, 2013

WSJ: States You Shouldn't Be Caught Dead In

Wall Street Journal Tax Report:  States You Shouldn't Be Caught Dead In: Investors Need to Contend With Growing State Estate and Inheritance Taxes, by Laura Saunders:

Nineteen states and the District of Columbia, home to just over one-third of the U.S. population, levy an estate tax on the assets of people who die or an inheritance tax on heirs receiving assets. Maryland and New Jersey have both, although each allows offsets to prevent double taxation. ...


In January, Congress voted to keep Uncle Sam's inflation-adjusted estate exemption above $5 million per individual ($10 million per married couple). The change excluded almost all Americans from the federal levy, so state-level taxes loom larger by contrast. (This year, the federal exemption is $5.25 million.)

Many states also have far smaller exemptions than Uncle Sam's. The threshold is $1 million for estate taxes in Massachusetts, New York, Oregon and Minnesota, and just $675,000 in New Jersey. Pennsylvania's and Iowa's inheritance taxes have no exemption in some cases. However, all states allow surviving spouses to inherit tax-free from their partners. ... Only Delaware and Hawaii track the U.S.'s $5 million-plus exemption. ... Rates can be high as well. The top rate often is double digits, with Washington state's the highest: 20%. Most state exemptions aren't indexed for inflation, extending the tax's reach over time. ...

Are these taxes effective—that is, do they raise more revenue than they lose when residents ... decide [to] go elsewhere? Economists are divided, and so are the states.

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