To:
Members of the Joint Committee on Revenue
January 12, 2022
The
cleanest, most straightforward bills to address the Massachusetts Estate
Tax are S.1862 and S.1942, both calling for abolition of the archaic
estate tax, aka, “the death tax." As one of only a dozen states in
the nation that still impose an estate tax, it is incumbent upon
Massachusetts to catch up with the other 38 and repeal its estate tax as
well.
Failing
that, the very minimum this committee and the Legislature as a whole can
and should do is to update and modernize what is currently
imposed on the heirs of deceased state citizens. Since 2001 the
state estate tax has had a unique “threshold trigger” not found
elsewhere, and it has never been adjusted for inflation, nor for the Bay
State's booming property value appreciation. Over those two
decades the CPI has increased by almost 60%.
Compare
that to state spending over the same period (FY2001 State Budget: $21.4
billion; FY2022 State Budget: $48.1 billion) — a 225% increase.
H.2881
provides: “SECTION 6. Chapter 65C of the General Laws is hereby amended
by striking out Section 1(k), as appearing in the 2012 Official Edition,
and inserting in place thereof the following section:-
“(k)
“Basic exclusion amount”, $2,750,000 which shall be annually adjusted
for inflation based on the US Department of Labor’s Consumer Price Index
(CPI) for All Urban Consumers. . . .”
That
would narrow the gap at least somewhat between the Massachusetts estate
tax exclusion and that of its neighboring states with an estate tax:
Connecticut ($7.1M), New York ($5.85M), Maine ($5.8M), and Vermont
($5.0M).
Indexing it to the CPI will keep the amount stabilized going forward.
We recognize the Legislature is fond of indexing its members’ salaries,
stipends and expenses to the CPI so legislators should be comfortable
doing likewise for the estate tax exclusion for their deceased
constituents, their families and heirs.
Bill
Harris, then-president of the Financial Planning Association of
Massachusetts, noted in his December 2017 Wicked Local Plymouth
column:
"Massachusetts implemented the current estate tax rules back in
2001. Unlike other states, it’s never been indexed for
inflation. In the past three years, nine states have
eliminated or lowered their estate taxes. Many more states are
raising their lifetime exemptions (the amount that is excluded from
estate tax calculation). New Jersey is scheduled to eliminate
its estate tax altogether, joining about a half-dozen others that
have ended their estate taxes over the past decade."
New
Jersey repealed its estate tax in 2018, leaving only a dozen states that
tax the estates of its deceased citizens. Currently Massachusetts
is tied with Oregon as the most onerous, with the lowest exemption of
$1,000,000 – but Oregon exempts the first million entirely even if the
value of the estate exceeds that first million.
Mr.
Harris further noted:
"If
you think the estate tax is only for the wealthy, think again.
The Massachusetts estate tax is regularly entrapping unsuspecting
middle-class families. If you own a modest house on the South
Shore and you’ve funded your IRA for an adequate retirement, your
estate may get hit with the death tax. In estate planning
circles, Massachusetts is the least desirable state in which to
reside if you want to pass assets to your heirs. . . .
"The
Massachusetts exemption threshold is only $1 million, much less than
the current federal estate taxes. But unlike the federal
estate tax, which only taxes the excess over the threshold, in
Massachusetts the threshold is a trigger, and the majority of estate
becomes taxable . . . snaring lots of taxpayers at death.
"The
tax on a $1 million estate is approximately $36,000, however the tax
on an estate that is $999,999 is zero. If you are a
Massachusetts resident and all of your assets combined are just a
bit above $1 million, get below that threshold or change your
residency before you die. Otherwise, death taxes will be due."
Citizens for Limited Taxation supports
H.2881, "An Act relative to
the Massachusetts estate tax code" sponsored by Rep. Shawn Dooley and
others. It is a well-considered proposal that will help ameliorate
today’s unintentionally-excessive state estate tax burden.
This
revision is long overdue. CLT and its members hope this committee
recognizes that and will support H.2881 as well.
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