Revised August 4, 2006

LATEST DATA ON MINIMUM WAGE WORKERS
AND TAXABLE ESTATES, BY STATE

by Joel Friedman

The House passed legislation on July 29 that includes two unrelated policies.  One would sharply reduce the estate tax; the other would increase the minimum wage to $7.25 per hour.  These two policies affect dramatically different populations.  The estate tax reduction only affects the nationís most well-off households, while the minimum wage increase would boost the earnings of some of the lowest income workers in the country.

The following table provides data that illuminate this contrast.  The first column presents estimates from the Economic Policy Institute, showing the number of workers in each state who would benefit directly from increasing the minimum wage to $7.25 an hour in 2009, as would occur under the House proposal.  EPI estimates that are 5.6 million such workers nationwide (workers who would earn less than $7.25 an hour in 2009 if the minimum wage were not increased).[1] 

The second column shows the number of estates in each state that paid the estate tax in 2004, reflecting the most recent data from the Internal Revenue Service.  In 2004, 30,200 estates paid the estate tax nationwide.  Most of these taxes were paid by the estates of people who died in 2003, because there is typically a nine-month lag between when a person dies and when the tax is paid.  In 2003, the estate tax exemption was $1 million for an individual ($2 million for a couple). 

In future years, far fewer estates in each state will pay the estate tax, because the exemption level will increase significantly.  Currently, in 2006, the exemption level is set at $2 million for an individual ($4 million for a couple), and it will rise under current law to $3.5 million for an individual ($7 million for a couple) by 2009.  As a result of this increase in the exemption, the number of estates paying the estate will decline sharply.  According to Urban-Brookings Tax Policy Center estimates, only about one-quarter as many estates will pay tax in 2009 as in 2004.  The House bill would reduce the estate tax below its 2009 levels, gradually increasing the exemption level to $5 million per individual ($10 million per couple), with the additional cuts benefiting only the small number of estates ó those of 3 in 1,000 people who die ó that would pay any tax under 2009 law. 

Thus the comparisons shown in the attached table do not fully convey the disparate impact of the minimum wage and estate tax policies in the House bill, because the number of taxable estates in 2004 is much greater than the number of estates that would face the tax if Congress simply continued 2009 law.

Number of Workers Who Would Benefit from Minimum Wage Increase and Estates that Paid Estate Tax in 2004, by State

State

Number of Workers Who Would Benefit from Minimum Wage Increase*

Number of Estates that Paid Estate Tax in 2004***

Alabama

126,000

278

Alaska

**

19****

Arizona

148,000

619

Arkansas

113,000

168

California

**

5,651

Colorado

85,000

251

Connecticut

**

640

Delaware

**

174

D.C.

**

131

Florida

207,000

2,912

Georgia

207,000

615

Hawaii

**

58

Idaho

39,000

93

Illinois

103,000

1,395

Indiana

143,000

414

Iowa

107,000

263

Kansas

105,000

183

Kentucky

133,000

231

Louisiana

274,000

91

Maine

**

124

Maryland

**

653

Massachusetts

**

985

Michigan

**

834

Minnesota

81,000

466

Mississippi

139,000

119

Missouri

178,000

484

Montana

33,000

60

Nebraska

53,000

200

Nevada

54,000

242

New Hampshire

**

168

New Jersey

129,000

1,112

New Mexico

68,000

100

New York

314,000

2,535

North Carolina

211,000

850

North Dakota

21,000

31****

Ohio

337,000

931

Oklahoma

113,000

252

Oregon

**

408

Pennsylvania

308,000

1,218

Rhode Island

**

101

South Carolina

179,000

263

South Dakota

29,000

60

Tennessee

151,000

315

Texas

863,000

1,427

Utah

81,000

64

Vermont

**

10****

Virginia

172,000

717

Washington

**

493

West Virginia

59,000

103

Wisconsin

124,000

602

Wyoming

17,000

62****

TOTAL

5.6  million

30,175

*Economic Policy Institute.  Reflects workers who would benefit from a $7.25 minimum wage in 2009. Available at http://www.epinet.org/Issueguides/minwage/table7a.pdf.

** Insufficient sample size to estimate precisely.  In many of these cases, state minimum wages will be close to or above $7.25 in 2009.  In some cases, the number of workers affected by the federal minimum wage increase is small but not zero, which explains why the state totals listed add to slightly less than EPIís national estimate.

***Internal Revenue Service.  Most of these taxable estates were subject to a $1 million exemption level.  Approximately one-quarter this number of estates will be subject to the estate tax nationwide when the exemption level rises to $3.5 million in 2009.

**** IRS estimates may be imprecise due to small sample of returns.

 


End Notes:

[1] These updated EPI estimates reflect the specifics of the House proposal.

 
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