- The Progressive Pulse - http://pulse.ncpolicywatch.org -
Public Statement before the House Finance Committee, Effort to Repeal Estate Tax
Posted By Cedric Johnson On February 20, 2013 @ 10:24 am In NC Budget and Tax Center | Comments Disabled
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.
Article printed from The Progressive Pulse: http://pulse.ncpolicywatch.org
URL to article: http://pulse.ncpolicywatch.org/2013/02/20/public-statement-before-the-house-finance-committee-effort-to-repeal-of-estate-tax/
Copyright © 2013 The Progressive Pulse. All rights reserved.