Statement by the NC Budget and Tax Center on the North Carolina Estate Tax
RALEIGH (March 7, 2012) -- Today, the Revenue Laws Committee put forward for consideration the repeal of the North Carolina estate tax. The state estate tax is a critical tool that addresses the upside-down nature of the revenue system while providing revenue that supports broader economic opportunity and wealth-building in the state.
In 2010, when the estate tax liability threshold was lower than it is this year (and was last year), a mere 123 North Carolina estates in total were impacted – that was only 2 of every 1,000 decedents in 2010. Under current federal law, the move to a lower threshold in 2013 -- $1 million for individuals or $2 million for couples -- will still mean that only a few among even the richest one percent will have any estate tax liability.
Second, the repeal of the estate tax in North Carolina would cost up to $170 million per year when fully implemented. 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.
Perhaps equally important, the repeal of the state estate tax does not affect federal law. Those with estate tax liabilities will still pay the federal estate tax and thus all revenue collections will be sent to the Federal Treasury instead of being re-invested here in NC.
To this point, 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 had significant small business or farm assets under 2010 federal tax law.
Additionally, the statutory estate tax rate overstates the total estate tax payments. In 2009 when the statutory rate was 45%, the effective rate paid was less than half that rate. This is because estates would only pay estate tax on the dollars above the exemption level.
There are also many estate tax provisions that make it easier for small businesses and farms 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.
Repealing the estate tax will move us further away from addressing the problems with the state’s revenue system and further away still from equitable and adequate comprehensive revenue modernization. Such a move will immediately undermine our ability to support the critical wealth-building investments and greater shared prosperity in our state.
FOR MORE INFORMATION CONTACT: Alexandra Forter Sirota, Director, Budget & Tax Center, Alexandra@ncjustice.org, 919.861.1468; Jeff Shaw, Director of Communications, NC Justice Center, firstname.lastname@example.org, 503.551.3615 (cell).