Consider some the following facts (especially #2!!) from the N.C. Budget and Tax Center and then try to fathom why in the heck the conservative General Assembly is moving to repeal the estate tax:
1) Eliminating the estate tax will cost North Carolina precious revenue. North Carolina’s state and local taxes already require a greater relative contribution from low-income and middle-class families than wealthy North Carolinians. Eliminating North Carolina’s estate tax, which already exempts all but the very wealthiest estates, would cost up to $80 million or more in state revenue annually in order to cut taxes for the state’s wealthiest households.
2) It’s a solution in search of a problem. Only a very few wealthy estates in North Carolina owe any estate tax in any given year. Because of generous exemptions ($3.5 million for individuals, $7 million for couples in tax-year 2009), the estates of only 2 of every 1,000 decedents in North Carolina resulted in any estate tax liability in 2010, a mere 123 estates in total.
3) Eliminating the estate tax will not help small businesses or family farms. Contrary to the claims of estate-tax opponents, there are almost no small businesses or farms among the very few estates with any estate tax liability. Only an estimated 1.3 percent of tax-liable estates nationwide have significant small-business or farm assets, about 140 in all states in 2011. Furthermore, there are many estate-tax provisions that make it easier for estates with closely-held businesses and farms to pay the estate tax, including spreading the payments over 14 years.
4) A significant share of North Carolina’s estate tax is essentially paid by the federal government. North Carolina’s estate tax is also entirely deductible on federal estate tax returns, meaning that the federal government would essentially pay up to 45 percent of the cost of an estate’s North Carolina estate tax liability if the 2009 federal estate tax parameters are made permanent.