Friday, February 21, 2014

GUEST POST: Progressive Maryland Sounds Off On Estate Tax Cut Proposal // By Kate Planco Waybright, Executive Director

Maryland Juice received the following guest post from Kate Planco Waybright, Executive Director of Progressive Maryland:

Maryland Progressives Lead Charge to Give Top 2% a Tax-Break 
on the Backs of Working Class Marylanders

KATE PLANCO WAYBRIGHT: Something smells fishy in Annapolis, and it’s not crab cakes. Unfortunately, some so-called progressive legislators (wait till you hear who!) have hopped on the Republican bandwagon—they are seeking to increase the Maryland estate tax exemption from the current level of $1 million to the federal level of $5.34 million. At a time when income inequality is one of the nation’s most discussed issues, a reduction in the estate tax fails to encourage a fair and progressive tax structure and will serve only the wealthiest Maryland citizens at the expense of hardworking middle and lower class families.

A just-released Baltimore Sun poll of 1200 registered voters likely to vote in the June primary show that a whopping 71% are concerned about the state budget deficit. At a time in which 594,000 Marylanders are still living in poverty, it is difficult to understand why any lawmaker—let alone one who bills him or herself as progressive—would cast a vote in support of cutting taxes on the wealthiest estates in Maryland, especially when such a measure will cost the state tens of millions each year. With a current estate tax exemption up to $1 million, less than 3% of estates are subject to the tax while nearly $90 million in revenues each year go to the state’s General Fund for core public services. These public services help provide a critical social safety net for our state’s most vulnerable citizens, and support our state’s investment in schools, job training, health care, public safety, infrastructure, clean energy, and so much more.

Senate President Mike Miller and Speaker of the House Mike Busch are the most enthusiastic about this move. They have sponsored bills in their respective chambers and lined up an impressive array of legislators as cosponsors. In the Senate, for instance, we have Montgomery County Sens. Jennie Forehand, Brian Feldman, Karen Montgomery, and Nancy King. Prince George’s County Sens. Joanne Bensen and Ulysses Currie. And Baltimore City Sens. Lisa Gladden, Nathaniel McFadden, and Catherine Pugh. That’s not the full list of Democrats adding their name to the proposal, either.

In the House, we have Montgomery County Delegates Jim Gilchrist, Ana Sol Gutierrez, Kathleen Dumais, Anne Kaiser, Ariana Kelly, Susan Lee, Aruna Miller, Lou Simmons, and Craig Zucker, plus a whole crop of Democrats from other parts of the state, including 2 attorney general candidates—Jon Cardin and Bill Frick. Full details on: SB602 & HB739.

Right above the lists of Democrats are these bills' fiscal notes, which say this:
The bill increases the value of the federal unified credit used in the calculation of Maryland estate taxes equal to an exclusion of $1.75 million for decedents dying in calendar 2014, $2.5 million in calendar 2015, and $3.5 million in calendar 2016. Beginning in 2017, the value of the credit will be equal to the amount of the federal exclusion allowed in the taxable year. As a result, general fund revenues decrease by $27.9 million in fiscal 2015, $58.6 million in fiscal 2016, $84.7 million in fiscal 2017, $121.9 million in fiscal 2018, and $137.7 million in fiscal 2019.
So, to review: Democrats in Maryland want to join Republicans in passing a tax break for the very wealthiest of Marylanders that will result in millions lost from our General Fund—more than $100 million in a few years. And to think—people say Maryland is so progressive. If that’s the case, what are these so-called progressives thinking?

Let me knock out some of the arguments I have heard. First, it’s important to note that while the estate tax is imposed on the transfer of the taxable estate of a deceased person, all property left to a surviving spouse, no matter the amount, is exempt from the estate tax. Second, you should be aware that the estate tax is not a duplicative tax, which some argue. Yes, Maryland has an inheritance tax—but inheritance taxes aren’t paid by the estate of the deceased, but by the inheritors of the estate. And the inheritance tax doesn’t apply to a direct beneficiary that includes a child, parent, step-parent, grandparent, spouse, sibling, other descendent, or a corporation if all stockholders are direct beneficiaries. That’s a pretty generous list.

Advocates for raising the exemption claim that wealthy, older Marylanders are leaving the state to avoid having their estates pay this tax, but arguments of tax migration are just a myth. Recent studies have confirmed Maryland’s distinction as the number one state for millionaires per capita. (The top six states in millionaires per capita in 2013 all have an estate tax!). In fact, a December report by the Maryland Dept. of Planning confirmed that people over 55 are the wealthiest segment of Marylanders, and that our state continues to gain wealthy residents in this age bracket.

Advocates also cite the burden on farms, but Maryland law protects family farms by exempting up to $5 million of unqualified agricultural property passing from a decedent to a family member who will continue to use the property for agricultural purposes for at least ten years. State law also limits the tax rate imposed and provides for a 3-year payment deferral for estate taxes on family farms.

So why would so-called progressive legislators in Maryland allow us to go in the wrong direction? Are they donning their George W. Bush masks because it’s an election year and they want to curry favor with conservatives? Do these legislators themselves have estates worth more than a million dollars? Do they feel it’s more important to ensure their wealthy constituents can hang onto every last penny of their millions than to take care of all Marylanders? 

Since 2010, six states have reinstated or increased their estate tax. Passage of this measure would be a grave injustice to the residents of the state of Maryland—helping the very few at the expense of many. Reducing taxes for the wealthy while robbing the state budget of funds that support programs that working families depend upon is just wrong. Progressive Maryland believes that a fair tax system asks all citizens to contribute to the cost of government services based on their ability to pay. We hope Maryland Juice readers will join us in opposing these efforts to increase the estate tax exemption for Maryland’s wealthiest citizens.

Please take a moment to send a message to your letters in opposition to these proposals:

Kate Planco Waybright
Executive Director, Progressive Maryland

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