Tuesday, February 8, 2011

State Estate Tax Reduces Job Growth And Causes Out-Migration

From "Death Tax Ambush: Many states now have crushing burdens" in The Wall Street Journal:
thanks to a quirk in December's GOP-White House tax compromise. The new law applies a top federal death tax rate of 35% with a $5 million exemption for 2011 and 2012. But it also changed a federal credit for state death tax rates into a federal deduction.
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New research indicates that high state death taxes may be financially self-defeating. A 2011 study by the Ocean State Policy Research Institute, a think tank in Rhode Island, examined Census Bureau migration data and discovered that "from 1995 to 2007 Rhode Island collected $341.3 million from the estate tax while it lost $540 million in other taxes due to out-migration."

Not all of those people left because of taxes, but the study found evidence that "the most significant driver of out-migration is the estate tax." After Florida eliminated its estate tax in 2004, there was a significant acceleration of exiles from Rhode Island to Florida.

Connecticut has come to the same conclusion. A 2008 study by the Connecticut Department of Revenue Services found that the 26 states without an estate tax produced twice as many jobs from 2004-07 and had a growth rate 50% faster than those with estate taxes.
The complete Wall Street Journal piece is available here (subscription required).

2 comments :

  1. Well, I'm not really so sympathetic to the cause of totally negating gift and estate taxes. But I do think it makes sense for all States to at least be on the same page when it comes to transfer taxes.

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  2. Great post, i really enjoyed reading it.

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