In today’s Daily Caller, Bill Felkner of the Ocean State Policy Research Institute (OSPRI) and Dick Patten of the American Family Business Institute urge repeal of Rhode Island’s estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. . They highlight:
- Rhode Island’s estate taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. is the third highest in the nation, after Ohio and New Jersey. The rate is a maximum of 55% on all assets, including those below the low $850,000 exemption where the law kicks in.
- Congress used to allow dollar-for-dollar credits against the federal estate tax for state estate tax paid. This enabled states to establish “pick up taxes” that transferred money from the feds to the states with no change to the taxpayer. Congress abolished the credit in 2005, and most states have adjusted their estate taxes accordingly. Rhode Island has not.
- Three-quarters of Rhode Island companies are family businesses.
- An OSPRI report finds that the Rhode Island estate tax brought in $27 million in 2009, but induced capital flight and reduced economic activity that lowered income tax collections by $94 million and sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. collections by $17 million.