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.The complete Wall Street Journal piece is available here (subscription required).
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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.
Correcting misconceptions about markets, economics, asset prices, derivatives, equities, debt and finance
Tuesday, February 8, 2011
State Estate Tax Reduces Job Growth And Causes Out-Migration
Posted By Milton Recht
From "Death Tax Ambush: Many states now have crushing burdens" in The Wall Street Journal:
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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.
ReplyDeleteGreat post, i really enjoyed reading it.
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