A recent editorial in the Wall Street Journal titled “The Die Harder States” illustrates what a heavy toll that 18 eastern, mid-western and western states are extracting on deaths of their citizens in the form of state gift taxes and state estate taxes, inheritance taxes or both.
An estate tax is imposed on the estate itself against the assets that are passing downstream to heirs. An inheritance tax is imposed on the recipients of the inheritance. Some states even impose a gift tax as well. These states take an additional 12-16% from families, raising a logical question of why those persons creating wealth would want to remain in a state seeming to have a distinct goal of lessening family wealth built up through family businesses.
The Journal, citing a study by The Family Business Coalition, references Minnesota, where the governor recently signed into law a new gift tax with a 10% rate for gifts over $1 million and a three year claw-back rule. Arizona, of course, has no estate tax, inheritance tax or gift tax. We are happy to have any one tired of paying those taxes come here. But the study points out that this could have a significant and negative impact on these taxing states as people move to more tax-friendly states such as ours and take their income and assets with them.
Michael W. Margrave