Death and Taxes
Benjamin Franklin once observed that “nothing is certain but death and taxes.” Who would have thought the two would become so closely intertwined? The federal death tax is 35 percent this year, and many states take another cut. Thanks to a recent twist in federal law rescinding a credit for state taxes and replacing it with a deduction, buying the farm in 20 states carries a combined federal and state tax bill of more than 40 percent (including inheritance and estate taxes). The Garden State of New Jersey tops the list, where government takes a whopping 54.1 percent of an estate for a citizen’s privilege of pushing up daisies. Not far behind is Maryland; dying in the supposed “Free State” costs 50.9 percent. On the low end of the top 20 (although hardly low in reality), death in Tennessee costs 41.2 percent.
However, the cost of dying is also costing these states. According to a study by the Ocean State Policy Research Institute in Rhode Island, “from 1995 to 2007 Rhode Island collected $341.3 million from the estate tax while it lost $540 million in other taxes due to out-migration.” The study found that “the most significant driver of out-migration is the estate tax.” In neighboring Connecticut, a study found that from 2004 to 2007, estate-tax free states created double the number of jobs and grew 50 percent more quickly than states with estate taxes. Coincidence? We think not.
Responding to the rising expense of expiring, some states are looking to kill the death tax, a move that is long overdue. After all, as if costs of living weren’t high enough, in some states, it’s the cost of dying that will kill you.
