RALEIGH (February 20, 2013) — The state estate tax is a critical tool that supports broader economic opportunity and wealth-building in North Carolina. It also addresses the upside-down nature of our state’s revenue system, since it affects very few North Carolinians – those with multi-million-dollar properties.
Unfortunately, the House Finance Committee today passed a total repeal of the estate tax. It is worth considering the impact such a radical policy shift would have on North Carolina’s finances and economy.
In 2010, a mere 123 North Carolina estates in total were impacted. That was only 2 out of every 1,000 decedents in 2010. Under current federal law, the move to a higher threshold of $5.25 million will mean even fewer estates will be affected.
It is well worth noting that while this move would 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 who earn less than $52,000 a year.
Repeal of the estate tax in North Carolina would reduce state tax revenue by nearly $300 million over the next five years, according to the Fiscal Research Division. Such a loss in state revenues, if addressed through cuts, will undermine the wealth-building investments in our state: education from pre-K to university, job training at community colleges, investments to encourage research and development and strong courts to fairly and efficiently address disputes between businesses.
There are almost no North Carolina small businesses or farms among the very few estates with any estate tax liability. The Tax Policy Center estimates that in 2012 only 40 small businesses and farms would pay the estate tax.
There are also many estate tax provisions that make it easier for those few small businesses and farms affected to pay the estate tax, including special assessments and deductions as well as spreading the payments over 14 years. Furthermore, there is no evidence that even the very few small-business or farm estates that owe estate tax would face the prospect of being liquidated.
The research on all aspects of the matter leads to several clear conclusions. Repealing the estate tax will move North Carolina in precisely the wrong direction. Truly equitable and adequate revenue modernization simply cannot exist without preserving the estate tax. The repeal absent broader efforts at comprehensive tax reform is truly troubling.
Repeal of the estate tax would immediately undermine our ability to support the critical wealth-building investments and greater shared prosperity in our state. To improve our economic future, North Carolina must preserve the estate tax.
FOR MORE INFORMATION, CONTACT: Alexandra Forter Sirota, Budget & Tax Center Director, firstname.lastname@example.org, 919.861.1468; Jeff Shaw, Director of Communications, email@example.com, 503.551.3615 (cell).