Former Presiding Justice, Wrentham District Court; served as chief legal counsel to governor Mitt Romney; former state representative from 9th Norfolk district.
Taxes shape human behavior. Cigarette and other sin taxes reduce demand for unhealthy products. Sales tax holidays encourage Massachusetts consumers to spend. The Massachusetts estate tax? Sadly, it does not result in long life for Massachusetts residents. Instead, it creates an incentive for people to leave Massachusetts as they reach their golden years. That’s why the Massachusetts Society of CPAs, in 2019 testimony supporting overhaul of the tax, noted that its members advise clients to move out of Massachusetts in part to protect their assets and pass savings onto their children.
Massachusetts is among only 17 states with an estate or an inheritance tax. Our “death tax” kicks in after $1 million of gross assets at a rate of 0.8 percent to 16 percent. For homeowners, small businesses, family farmers, retirees, and others who have worked hard to save and create a good life for their families, that threshold is too low. Sure, “tax the rich’' is an easy rallying cry for the political left, just as it was after ratification of the 16th Amendment that created the federal income tax. When the federal income tax was first levied in 1914, the rich paid the top rate of 7 percent. By 1933, taxpayers near the bottom of the income scale paid 8 percent.
The real cost of losing senior residents who seek to avoid the Massachusetts death tax? States that lose senior citizens who relocate to lower-tax states also lose years of resident income, capital gains, sales, and excise taxes. And Massachusetts loses the diversity, experience, and example of our senior citizens who scrimped and saved to make a better life for their children and grandchildren. A recent Pioneer Institute study showed a long-term pattern of wealthy Massachusetts residents relocating to Florida and New Hampshire, two states with no personal income or estate taxes.
House Bill 2881, filed by representative Shawn Dooley of Norfolk, fixes the flaws of our current Massachusetts death tax. Notably, it would raise the exemption for the tax to $2.5 million, more in line with other New England states. Call your state legislator to urge their support for this proposal. Or you can leave them your forwarding address.
Senior policy analyst and advocacy director, Massachusetts Budget and Policy Center
The estate tax is Massachusetts’ only major tax designed to reduce how much individual economic success depends on being born into a wealthy family. Proposals to weaken the estate tax, such as by raising its exemption, would literally be a gift to some of the Commonwealth’s wealthiest families at the expense of everyone else. Paring back the estate tax would cut taxes for the wealthiest, while the state would lose revenue each year that could support schools, public health, libraries, and the other essential needs that give everyone the best chance to succeed.
Since the 1980s, average wealth in the US has barely grown for the bottom 90 percent of families, but more than doubled for those in the top 10 percent. The top 1 percent now claim about 40 percent of all wealth. Such gaps also compound racial inequality. A typical white family in the US holds eight times the wealth of a typical Black family and five times that of a Latinx family. For the lucky few who receive a large inheritance, estate taxes already include many exceptions. Spouses and some family-owned businesses, for instance, are shielded from the tax.
The estate tax is a way large accumulators of private wealth can give back for their reliance on public investments. The value of stocks, bonds, and other assets depend on schooling that educated a business’ workforce, the roads that brought goods to market, the courts that enforced contracts, the police that protected against theft, and so on.
Finally, the estate tax addresses some of the ways current law favors people who can afford to hold onto assets rather than sell them to pay for such expenses as retirement and their children’s college. Much of the value of large estates left to heirs is typically stocks, bonds, real estate, and other assets that appreciate over time. When those assets are inherited, their value gets reset. All the capital gains the assets accrued prior to inheritance remain untaxed. The estate tax in part compensates for that.
The pandemic both exposed and worsened economic disparities across Massachusetts. This is the wrong time to weaken the only tax that directly reduces inequality.
As told to Globe correspondent John Laidler. To suggest a topic, please contact firstname.lastname@example.org.
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