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State-by-State Look: Estate Tax Repeal Benefits Only Wealthiest Few

December 12, 2016 at 5:15 PM

“The odds are good,” Senate Finance Committee member John Thune noted recently, “that we can repeal the estate tax” in the coming tax reform debate. He suggested “consensus support” for his 2015 proposal, to which House Ways and Means Chairman Kevin Brady introduced an identical bill in the House. But repealing the estate tax would be unwise, as it would cut revenues and, as our state-by-state table below shows, benefit only the heirs of the richest handful of estates in each state.

Senator Thune’s repeal bill would cost the government $269 billion over the decade, the Joint Tax Committee estimated. Repeal also would eliminate the tax code’s most progressive component: the top 10 percent of taxpayers pay 97 percent of the estate tax, according to the Tax Policy Center.

Currently, the estate tax doesn’t apply to the first $10.9 million of a couple’s estate, and estates that are subject to the tax consist mostly of unrealized capital gains that would otherwise never be taxed. As a result, repealing the estate tax would benefit only a small number of the wealthiest estates. In 2017, just 5,400 estates — roughly 2 out of every 1,000 Americans who die — would benefit. Those that benefit would get an average tax cut of more than $3 million, with 331 estates worth more than $50 million getting more than $20 million apiece, on average. Contrary to what repeal’s proponents suggest, only roughly 50 of the taxable estates would be small businesses or family farms.

See, below, estimates of roughly how many and what percentage of estates in each state would benefit from repeal in 2017.

TABLE 1
A State-by-State Look at the Estate Tax
  Number of taxable estates in 2017 As percent of total
United States 5400 0.2%
Alabama 50 0.1%
Alaska *10 *0.1%
Arizona 80 0.2%
Arkansas 20 0.1%
California 1100 0.4%
Colorado 50 0.1%
Connecticut 120 0.4%
Delaware fewer than 10 0.1%
District of Columbia 30 0.6%
Florida 660 0.4%
Georgia 90 0.1%
Hawaii 10 0.1%
Idaho *20 *0.1%
Illinois 260 0.2%
Indiana 80 0.1%
Iowa 50 0.2%
Kansas 50 0.2%
Kentucky 30 0.1%
Louisiana 60 0.1%
Maine 20 0.2%
Maryland 80 0.2%
Massachusetts 120 0.2%
Michigan 100 0.1%
Minnesota 90 0.2%
Mississippi 10 0.0%
Missouri 70 0.1%
Montana *10 *0.1%
Nebraska 30 0.2%
Nevada 60 0.3%
New Hampshire 30 0.2%
New Jersey 150 0.2%
New Mexico 10 0.1%
New York 480 0.3%
North Carolina 120 0.1%
North Dakota *20 *0.3%
Ohio 130 0.1%
Oklahoma 50 0.1%
Oregon 50 0.2%
Pennsylvania 150 0.1%
Rhode Island 20 0.2%
South Carolina 50 0.1%
South Dakota 20 0.3%
Tennessee 40 0.1%
Texas 340 0.2%
Utah 20 0.1%
Vermont *10 *0.1%
Virginia 150 0.2%
Washington 70 0.1%
West Virginia *20 *0.1%
Wisconsin 60 0.1%
Wyoming 10 0.2%

* Based on a small sample of tax returns.

Source: CBPP based on Internal Revenue Service (IRS), Joint Committee on Taxation (JCT), Centers for Disease Control and Prevention (CDC), and Census. Estimates are rough given the small numbers of estates paying the tax each year. Rounded to the nearest ten estates and the nearest tenth percent. For the number of taxable estates, we assume that each state’s share of the JCT estimate for 2017 would be the same as in the IRS data of estate tax returns filed in 2014. For the total number of estates, we apply the CDC estimates of adult deaths and total population in 2014 by state to the Census estimate for 2017.

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