Taxing Issues: Estate Tax

TAXING ISSUES: A SIX PART LOOK AT ISSUES THAT HINDER TENNESSEE’S ABILITY TO BE A JUST A PROGRESSIVE STATE.

Part IV: The Truth about Estate Taxes

What’s the estate tax, and why did Governor Haslam work so hard to repeal it last year in Tennessee? Last year, the estate tax was a subject that inspired lots of emotion-based language, designed to tug on the heartstrings of hardworking Tennesseans. Today, we’ll break down this language, dissect it, and discover the root of the argument against one of Tennessee’s most progressive taxes.

MYTH #1: "This is just another way we're looking at reducing taxes in the state of Tennessee,'' Rep. Sargent said. "Republicans just believe this is the way to go. It brings in more business, which in turn brings in more revenue.” – Rep. Charles Michael Sargent, R-Franklin

BUSTED: The Congressional Research Service recently analyzed six decades of data and found that top tax rates "have had little association with saving, investment, or productivity growth." Furthermore, the study found that cuts to top marginal rates led to greater income inequality. Rep.’s Sargent’s claim may sound appealing, but the evidence would point to a much different scenario.

Myth #2: "The governor doesn't consider living anywhere else but Tennessee, so the elimination of the gift tax here won't impact his planning decisions.'' – Alexia Poe, Gov. Haslam’s spokeswoman.

BUSTED: The governor may not be looking to relocate, but he can certainly turn Tennessee into a desolate state devoid of solid social services in order to serve himself. According to an interview with his CPA in 2010, Haslam, a super-rich heir to the Pilot Flying J corporation chain stores, transfers stock to his children by selling it as opposed to giving it away. J. Todd Ellis, CPA, says that the governor avoids paying some taxes this way, generating about $1.1 million dollars per year for himself, and effectively kicking the vulnerable while they’re down.

Myth #3: “Tennessee charges you to die.” (Colloquial)

BUSTED: We’re still surprised by the need to say this, but there is no charge for dying. According to existing policy, estate taxes are to be paid on household valued at $1 million or more, and are to be paid for the privilege of transferring significant wealth. The tax is paid by the descendant’s estate.

In conclusion, the estate tax is one of the most progressive taxes Tennessee has: it ensures that America is still recognizable in 50 years as a place where upward mobility is possible, where wealth does not concentrate among the very top families like a 15^th century European aristocratic society and everyone has opportunities for self-improvement. Between 2010 and 2011, Tennessee collected $97,875,967 from the estate tax. With that kind of money, we could make concrete improvements in everyday people’s lives, from better education for our kids to safer streets to cleaner water to more effective health services.

Or it could be used to further stuff the pockets of Tennessee’s already bloated wealthy class. Your choice.