Connecticut should kill its death tax
I'm sorry to borrow a derogatory term from political conservatives, but a tax on someone's estate is indeed a death tax.
It is, I believe, also a strange twist in our capitalist social system, which is intended to encourage people to work hard, innovate, persevere and make a lot of money. Then, when you die, with an estate tax, we will take a lot of it away.
I will leave the national politics of the death tax to the imminent debate over tax reform, though I would suggest that closing tax code loopholes and changing tax rates on money as it is earned is a better way to address the growing inequality in wealth in America.
Hedge fund managers should not be paying income tax at a lower rate than their assistants.
Here in Connecticut, one of only 15 states in the country — a dwindling number — with its own death tax, the need to eliminate this confiscation should be quite obvious.
Connecticut is losing hundreds of people each week to other states, according to census statistics, and many of those are people who were paying a lot of taxes here every year.
Certainly the estate tax is behind a lot of the wealth flight from Connecticut. Who smart enough to make a lot of money in their lifetime would be dumb enough to stay on through retirement in Connecticut, which is prepared to take up to 12 percent of your estate, when there are 35 other states that won't touch a dime of it?
Not only does Connecticut tax estates, but the threshold that triggers the local death tax, at $2 million, is less than half the minimum for the federal estate tax.
That's right. Some estates that owe nothing in federal tax can owe quite a bit in Connecticut.
You don't have to look much beyond Connecticut's current fiscal crisis to see that the state's longstanding Robin Hood tax system, keeping small challenged cities afloat with wealth from Fairfield County, is beginning to break down. Just ask a Fairfield Realtor about wealth flight.
One billionaire moving out can move the needle on Connecticut tax revenue.
Still, the death tax on the rich, unlike ordinary income tax, is not that large a percentage of state revenue. In the last three fiscal years it ranged from $169 million to $221 million, not chump change but not a lot if you calculate the billions at risk in lost income tax.
The revenue from estate and gift taxes at the federal level is not that great either, less than 1 percent of overall revenue — a small sliver in a big pie.
Using a death tax as social policy to slow dynasty building, or to reiterate the country's egalitarian, equal opportunity principles, if necessary, should be accomplished at the national level.
The 15 states that have estate taxes should not be practicing this kind of social engineering.
And, as conservative tax-cutting advocates will tell you, the death tax is inherently unfair, because you are essentially taxing money that already has been taxed, as it was accumulating as wealth.
I saw a young man the other day wearing a button I've never seen before. "Tax the Rich," it said.
This seems especially indicative of the times, as wealth inequality comes into greater focus, and the volume rises, in the run-up to the next election, on new populist voices on the left and right.
I might consider wearing one of those buttons, with a longer message anyway: "Tax the Rich, Until Death Do Us Part."
This is the opinion of David Collins.
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