At what level should an individual’s estate be taxed? $1 million? $2 million? $5 million? Back in 2014, D.C passed a major tax reform deal that included increasing its estate tax exemption amount from its then-$1 million level, once revenue targets were met.
So the District’s exemption level doubled to $2 million at the start of 2017, and now it’s poised for 2018 to go up to match the generous federal exemption level.
There was a cry to stop the scheduled cuts, but to no avail. Yesterday, the Council of the District of Columbia rejected an amendment to the budget to stop the 2018 estate tax cuts from going into effect with the intent of using those funds towards education and social services.
“Our students and our most marginalized populations are continuously shortchanged,” said Councilmember David Grosso, who penned the amendment, in a statement after the vote. It was rejected 9-4.
The Council passed the budget in a preliminary vote; it will vote on it again on June 13.
Ed Lazere, executive Director of the DC Fiscal Policy Institute, who was a member of the tax revision commission under former Mayor Anthony Williams, says that the proposed 2018 budget falls short of achieving the goal of “inclusive prosperity” that mayor set, leaving funding gaps in the area of homelessness, high poverty schools and child care programs.
“It’s more beneficial in the long term to be investing in D.C. residents than giving tax breaks to wealthy few,” he says.
How much is at stake? The change would cost the District $16 million a year, according to the Office of the Chief Financial Officer. In 2015, the estate tax brought in $32 million of revenue (0.45%), according to D.C. Tax Facts.
For 2017, in 18 states and the District of Columbia, you can owe estate or inheritance tax—separate from the federal estate tax. The trend has been for states to repeal their estate and inheritance taxes—or at least lessen the bite by raising the exemption amounts to match the generous federal estate tax exemption.
Neighboring Maryland has been increasing its estate tax exemption: it will reach $4 million in 2018, and match the federal exemption in 2019. Virginia doesn’t levy an estate tax. See Where Not To Die In 2017 for a state-by-state run down.
Minnesota is facing a tussle over its estate tax this year too.
