Posted on 01/02/2020 11:45:23 AM PST by karpov
While death and some taxes may be certain, US state-level estate taxes can be avoided by moving to one of the 36 states that do not collect them. Some very wealthy individuals do just that. In Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy (NBER Working Paper 26387), Enrico Moretti and Daniel J. Wilson attempt to quantify how state estate taxes affect the residential choices of the very rich, and to estimate whether, when states increase their estate tax rates, the increased revenues collected from those who remain in the state exceed the revenues lost as some well-to-do citizens move away. They use data from the Forbes 400 list of the richest Americans to study the location choices of the very rich.
The impact of state-level estate taxes on the total taxes paid by the estates of wealthy decedents changed significantly in 2001 as a result of new tax legislation. Prior to that year, the federal estate tax included a credit for state estate tax payments. This credit offset virtually all state estate tax payments for very high net worth individuals, making these taxpayers’ state of residence largely irrelevant for their total estate tax payments. The researchers point out that because the asset threshold for state and federal estate taxes can differ, even before 2001, individuals with enough wealth to pay state estate taxes, but who were not ultra-wealthy, could face tax differences linked to their state of residence. But these differences were largely irrelevant for the ultra-rich, with wealth many times greater than the taxable threshold.
After 2001, taxpayers became fully liable for state estate taxes. These taxes can be substantial: the researchers estimate that the average state with an estate tax collects $165 million in incremental revenue
(Excerpt) Read more at nber.org ...
Don’t tell the Democrats in California that there is a tax that they forgot about.
Cue Gomer Pyle “Surprise” jpg...
Exit fee
This is why democrats prefer taxing at the federal level. When democrats hike up tax rates at the state or local level their taxpayers tend to move somewhere else. To avoid taxes at the federal level, you have to flee the country, which many high income taxpayers do (particularly corporations), but it is harder than moving to another state.
The democrats’ ideal would be for taxes to be assessed by the UN.
The truly wealthy can easily establish residence for tax purposes at one of their overseas homes.
While politicians love to talk about taxing the rich, it is like herding cats.
The cats just run away in dozens of different directions.
The problem with taxing billionaires is that they can just leave. Sure you might try to use exit taxes but when you do you ensure that no billionaires will ever move to your state.
I know a guy who has a business that operates mostly in California. He is incorporated in Florida. As he says, “Only a fool would incorporate in California.”
Moving to a state that’s not going to rip your family off after you die seems like a no-brainer.
Wealthy people have been fleeing NY State for decades.
California has not overlooked the estate tax. A bill was introduced last March to impose a California estate tax at 40% on the entire estate above $3.5 million up to the federal estate tax exemption (currently $11.2 million). This bill appears to have been tabled, but that tax has not been forgotten. That’s why the Silicon Valley wealthy live in Incline Village, Nevada, and elsewhere.
We have a national exit fee, in the sense that all assets are marked to market and tax is paid on any gains against basis as if they were sold. An internal state exit tax would be oppressive, and would cause a real firestorm.
Every Florida retiree from a high tax state--such as NY--would have to pay such a tax. Of course, there would be the usual arguments about exemptions and millionaire punishment.
And the states could make it asset based rather than profit based, following the lead of Bernie and Lizzie.
The reason? Massachusetts had a huge state death tax whereas Florida had none.
When the Rat Party Director of the Massachusetts Department of Revenue was asked about this he basically said "nothing to see here,move along".
Those who know the Kennedys...and Massachusetts...weren't even slightly surprised.
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