NC Budget and Tax Center

Public Statement before the House Finance Committee, Effort to Repeal Estate Tax

Public Statement before the House Finance Committee

House Bill 101 – Repeal of Estate Tax

February 20, 2013

Thank you Mr. Chairman and members of the House Finance Committee

My name is Cedric Johnson and I serve as a public policy analyst with the NC Budget and Tax Center. Since its founding, the Budget and Tax Center has advocated for a state tax system that meets the principles of adequacy, equity and stability, and that allows the state to make adequate investments in public structures that provide the foundation for economic growth.

I stand before the committee today in opposition to House Bill 101. Repealing the estate tax will not address the problems with our tax system: that it is upside-down and inadequate to support the foundation of economic growth.  And repealing the estate tax will not improve economic outcomes.

First, less than one percent of North Carolina taxpayers are subject to the estate tax annually. For FY2010, only 123 taxpayers in North Carolina were subject to the estate tax and that number has dropped since then. It is worth noting that while House Bill 101 aims to provide a tax cut for a handful of estate beneficiaries, efforts are being made simultaneously to reduce the value of the Earned Income Tax Credit, which would impact over 900,000 individuals in North Carolina (House Bill 82).

Repealing the estate tax will reduce the availability of revenue for public investments. Nearly $300 million in lost state revenue over five years will result from the repeal, according to the Fiscal Research Division.

Regarding the common claim that the estate tax adversely impacts small family farms and businesses, research finds this claim to be untrue. The Tax Policy Center estimates that, for 2012, only 40 small businesses and farm estates nationwide owed any estate tax. For 2013, estates are allowed to exclude $5.25 million from respective estate values, with the estate tax applying to estate values that exceed this exclusion threshold. Accordingly, the number of small businesses and farms subject to the estate tax in North Carolina will likely decrease.

Regarding the claim that the estate tax amounts to double taxation for those few large estates that do owe estate taxes, a substantial proportion of their assets have never been taxed. Indeed, much of the assets in estates consist of untaxed capital gains — that is, property, stocks, and bonds that have appreciated in value since they were first purchased by the decedent but have never been subject to tax.

Finally, the elimination of the estate tax is unlikely to usher in increased savings, migration to another state or increased growth.  A Congressional Research Service report found that the estate tax’s net impact on private saving is unclear — it causes some people to save more and others to save less — and that its overall impact on national saving (a critical determinant of the amount of capital available for private investment) is likely negative (as a result of eliminating the estate tax).

The envisioned tax cut from repealing the estate tax will not be fully realized because doing so will increase the amount of federal estate taxes owed. The value of an estate for federal estate tax purposes is reduced by the amount of state estate taxes paid. Thus, repealing the estate tax means that 40 percent of revenue raised from the estate tax would now go to the federal government – and away from the state coffers.

Given the multiple reasons presented as to why repealing the estate tax represents flawed public policy, I urge members of the committee to give an unfavorable vote to House Bill 101. Thank you and I am happy to answer any questions.

Check Also

New budget a roadmap full of potholes and an unclear destination

A new BTC report highlights how the new ...

Top Stories from NCPW

  • News
  • Commentary

When the N.C. Senate elected Tom Fetzer to the UNC Board of Governors in March, it was widely seen a [...]

The 12 minutes spent on the phone with Duke Energy customer service shed no light on how — or if — c [...]

Crumbling ceilings. Failing air conditioning and heating systems. Broken down school buses. Mold inf [...]

This story has been updated with comments from Jim Womack, who did not respond earlier to questions. [...]

Last week, the General Assembly announced which legislators will serve on the Joint Legislative Task [...]

The latest effort in Washington to repeal and not actually replace the Affordable Care Act has a dif [...]

Conservative group “reviewing” bigoted attacks; funding from major NC corporations implicated Nearly [...]

5---number of days since Senators Bill Cassidy and Lindsey Graham unveiled a new proposal to repeal [...]

Featured | Special Projects

NC Budget 2017
The maze of the NC Budget is complex. Follow the stories to follow the money.
Read more


NC Redistricting 2017
New map, new districts, new lawmakers. Here’s what you need to know about gerrymandering in NC.
Read more