In national politics, the estate tax has become a dividing line between Democrats and Republicans, but this May Delaware moved one step closer to eliminating the state’s estate tax.
The Associated Press reported that the Delaware House approved the measure in a 26 to 16 vote, and if it gains state Senate approval, it will be signed into law. While the U.S. Senate has 100 members, two from each state, the vote will now go before Delaware’s 21 senators. If they also pass the measure, any Delaware resident who dies after December 31 of this year will be exempt from the estate tax.
The national estate tax only applies to a small percentage of Americans as it is; unless the estate is valued at more than $5.43 million (or $10.86 million for a married couple), you’re exempt from federal estate taxes. In Delaware, only estates worth more than $5.49 million are subject to the state estate tax.
Back in September, President Trump talked about his plan to end the controversial tax, claiming that it hurts small business owners.
“It’s a double taxation. A lot of families go through hell over the death tax,” he said at the time.
However, the Tax Policy Center estimates that in 2013, only around 20 small businesses owed estate taxes, and they averaged just 4.9% in tax value.
“The top 10% of income earners pays over 90% of the tax, with over one-fourth paid by the richest 0.1%,” the Tax Policy Center said. “Very few farms or family businesses pay the tax.”
If Delaware does abolish the estate tax, financial analysts say the state will lose around $3.7 million in fiscal 2019 and about $5 million the year after that.
Still, Representative and Newark Republican Mike Ramone is convinced that wealthy people often move out-of-state to avoid the tax. This results in loss of personal income tax revenue that the state would have otherwise received.
Predictably, liberals and Democrats tend to disagree.
“Many wealthy estates employ teams of lawyers and accountants to develop and exploit loopholes in the estate tax that allow them to pass on large portions of their estates tax-free,” according to the Center for Budget and Policy Priorities in Washington. “These strategies don’t benefit the broader economy; they only allow the wealthiest estates to avoid taxes.”