EDITORIAL: Pull plug on death tax

Oct. 02--As Washington, D.C., wrestles with its version of reform -- including a repeal of the estate tax -- a modest little proposal has surfaced on Beacon Hill to broaden the exemption on Massachusetts' own "death tax."

A bill filed by Rep. Shawn Dooley (R-Norfolk) is aimed at giving a break to what he called "accidental millionaires."

"People that no one would consider wealthy are currently being hit by the Massachusetts death tax," he told a legislative hearing last week.

He cited a hypothetical family with a home they bought decades earlier for a bargain $38,000 that is now worth $1.5 million. That surely is happening all over Greater Boston right now. And, say, they wanted to leave a small family business, a garage, to a son.

So, yes, the heir becomes an "accidental millionaire."

Currently the federal estate tax exempts inheritances under $5.49 million. But the state inheritance tax threshold is currently $1 million. Dooley's bill would increase that to $2.745 million and exclude the value of the primary residence from the estate calculation.

Now most families with substantial assets engage in the kind of estate planning and tax avoidance that will allow them to pass their wealth on to children via trusts and gifts virtually tax free. It's those without such resources -- and the expertise it buys -- who end up paying the most.

In fact, the state collected a mere $337 million (1.28 percent of total revenues) from the tax in fiscal 2017.

But more to the point, Massachusetts is one of only 15 states and the District of Columbia that levies an estate tax at all -- which means it's not just the weather that leads people to establish residences in Florida or Arizona.

"The elimination or reduction of the estate tax would result in retention of some high-tax payers and their estates in Massachusetts," said Christopher Carlozzi, Massachusetts director of the National Federation of Independent Businesses.

"The retention of fewer than 200 estates and the collection of income and sales tax through the years from those individuals and their families in Massachusetts could pay for the elimination of the tax," he told the Legislature's Revenue Committee.

And what a sensible approach that would be.

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