ELLSWORTH — Governor Paul LePage has renewed his effort to eliminate Maine’s estate tax, a move he says would make the Pine Tree State a more appealing place to live, retire and run a business.
Under the state’s current tax code, Mainers who own more than $5.45 million in taxable property are subject to the estate tax. When they die and their property is inherited by someone else, the state collects a tax on a portion of that property.
Supporters of the estate tax argue that it is an important source of funds for education, health care and infrastructure projects. Given that the tax only affects Maine’s wealthiest residents, they also say eliminating it would further Maine’s inequality.
But opponents of the tax, such as LePage and Maine Finance Commissioner Richard Rosen (of Bucksport), say it is an ineffective source of tax revenue that hurts family businesses such as farms and forestry operations, where assets are passed from generation to generation.
They also say it dissuades wealthier Americans from settling here, depriving the state of the economic benefits they would bring.
Maine is one of 18 states with an estate tax. The last state to eliminate its estate tax was Tennessee, which did so this year.
“You are taxed throughout your life on what you earn, what you buy and what you sell,” LePage said in a statement. “It seems only reasonable that Maine should join the majority of states in this country that allow you to leave a nest egg for your loved ones without taxing it when you die.”
The amount of tax revenue coming from Maine’s estate tax has generally been shrinking over the last couple years, but it has spiked upward every couple years, according to Maine Revenue Services data. In 2010, the state was owed about $50 million in estate tax. That number jumped to $70 million in 2012, but has dropped almost every year since.
This year’s estimated collections are $14.4 million, according to Finance Commissioner Rosen, who believes the estate tax is an “unpredictable revenue source.”
The bill to eliminate it has been sponsored by Sen. Earle McCormick (R-Kennebec County). It was under consideration by the Legislature’s Taxation Committee earlier this week.
This is not LePage’s first time pushing state lawmakers to eliminate the estate tax. He did so last year, and since he took office, the state has upped the minimum taxable property someone must own to have his or her estate taxed. It was $1 million when LePage entered the Blaine House and $5.45 million now.
According to Rosen, the estate tax proposal is just one of the changes the LePage administration would like to see in the tax code. LePage has urged removal of the estate tax before. He has also pushed lawmakers to eliminate the state’s income tax, so far unsuccessfully.
The administration believes the tax changes would, cumulatively, make Maine more business-friendly. Rosen pointed to neighboring New Hampshire, a state that does not collect an estate or sales tax and where the population recently climbed past Maine’s for the first time in 215 years, according to U.S. Census figures.
Those who oppose the elimination of the estate tax argue that doing so would help the rich at the expense of the poor.
In written testimony against the proposal, Sarah Austin, an analyst at the Maine Center for Economic Policy, called it a “giveaway to fewer than 60 of the wealthiest families owning property in Maine each year.”
Austin pointed out the estate tax contributes to the state’s school and infrastructure funding. She also said that in 2013, only 20 small farms and businesses owed any estate tax.
Cutting the estate tax, she went on, would “come at a huge cost to the other services that all farms, businesses and residents rely on” and “force legislators to either raise revenue from other taxes or cut essential state funding for the very services like schools, road maintenance, job training and more that keep our economy going.”
Austin also called the estate tax “the best tool we have for addressing income inequality and the squandered economic growth that results from income inequality.”
According to Rosen, though, the estate tax is a relatively small source of state revenue. It is projected to net around $15 million this year, which pales next to revenues from the income, sales and property taxes.
“Just as importantly,” Rosen said in testimony to the taxation committee, “the Office of Tax Policy estimates that we would only need to retain or attract 400 individuals in order to collect the same amount of tax revenue as is currently provided by all estate tax returns.”