“The estate tax is one of the best tools for ensuring that all Maine children, regardless of how wealthy their parents or grandparents were, have the opportunity to thrive.”
Augusta, Maine (Monday, March 30, 2015) The Maine Center for Economic Policy (MECEP) will testify today in support of legislation that would return Maine’s estate tax exemption rate to its pre-2011 level of $1 million while retaining other provisions from the 2011 estate tax changes that simplified tax brackets. For a copy of today’s testimony as submitted to the committee, click here.
“The estate tax is one of the best tools for ensuring that all Maine children, regardless of how wealthy their parents or grandparents were, have the opportunity to thrive,” MECEP economist Joel Johnson says in testimony prepared for delivery to the legislature’s Joint Standing Committee on Taxation. “This bill would improve the economic efficiency and fairness of Maine’s tax code.”
Johnson noted that the governor and the legislature amended Maine’s estate tax in 2011 to increase the exclusion from $1 million to $2 million, simplify brackets and lower rates. These changes provided a tax cut of about $27 million per year that affects approximately 600 of the 13,000 estates settled annually in Maine.
“Without an estate tax, Maine’s wealthiest families would pay zero state taxes on much of their income. Increases in the value of assets like stocks and real estate that are held until death would go untaxed,” Johnson adds. “This bill [LD 501] would raise $15 million that could then be used to reduce taxes elsewhere, in targeted fashion, for low- and middle-income Maine residents. For a given level of public investment, revenue not collected by the estate tax must necessarily be collected by other taxes on income, sales, or property. All of those taxes are less efficient for the economy and fall harder on low- and middle-income taxpayers.”
In February, Johnson testified in opposition to a proposal to eliminate Maine’s estate tax entirely.
“A popular yet misleading claim made by estate tax critics is that it hurts small businesses and forces their heirs to sell the family business to pay the estate tax bill,” he told the committee at a February 17, 2015 hearing. “The reality is that very few small businesses are subject to the estate tax because very few are worth enough to trigger the tax. Small businesses and family farms are valued for estate tax purposes according to special valuation considerations and after taking account of both assets and liabilities.”
Johnson has also provided more detailed analysis of the various estate tax proposals in posts to MECEP’s blog.
“Thanks to information provided to the Taxation Committee yesterday by Maine Revenue Services, we learn that nearly half of the benefit would accrue to the estates of wealthy out-of-state residents,” Johnson wrote on March 18, 2015. “There were 153 taxable estates in Maine from decedents who died in 2013. Of those, 83 (54%) belonged to Maine residents and the remaining 70 (46%) belonged to out-of-state residents.”
“The Governor’s plan to eliminate the state’s estate tax is bad for Maine, and the legislature should reject this proposal. It would hurt our ability to invest in a stronger economy for the state,” Johnson wrote on February 3, 2015, “It would reduce state revenue by $14 million in Fiscal Year 2017 (the state budget year that begins on July 1, 2016) and by $71 million in revenue over the two-year budget period that begins on July 1, 2017. That’s more than enough to double property tax relief for low- and moderate-income Mainers. It’s more than enough to double Maine’s earned income tax credit and make it refundable, which helps build a ladder to the middle class for Maine’s low-income working families and reduces child poverty.”