No Evading Taxes, Even When You Die
When you go, they say “you can’t take it with you,” but, if you live in New York, you may not be able to leave anything to your loved ones, either – particularly, if certain “death tax” proposals make their way through the state legislature. And if some lawmakers are successful, it looks like many (previously exempt) New Yorkers may have their inheritances taxed at exceedingly high rates.
As policymakers come to terms with an estimated $15-billion-dollar deficit for fiscal years 2021 and 2022, they are desperately scrambling to find ways to shore up funds. Unfortunately, some politicians, like State Senator Jabari Brisport of Brooklyn, and Assembly member Michaelle Solages of Long Island, are targeting property of the dead. If their proposals pass, New Yorkers would see a 5% tax on gifts over $250,000, and will have to pony up as much as 50% on inheritances over $10 million.
Currently, state law allows up to $6 million dollars to be passed on to beneficiaries without having to share a piece with the government, whereas the federal estate tax stands at $11.7 million. This means that the NY proposal would substantially widen the net of people subject to the new tax. The federal estate tax is set to drop back to $5 million by 2026, however President Biden has called for it to drop to its 2009 level: $3.5 million. Proponents claim that the current estate tax structure (both at the state and federal level) allows for disproportionate generational wealth without providing sufficient public benefit.
“It is time for each of us to do our part in building back a better and more equitable New York” Solages proclaimed, “We must invest in New Yorkers who make up the foundations of our society and economy. High-income New Yorkers must contribute their fair share to ensure our middle and low-income families recover from the COVID-19 pandemic.”
While those in the know (including some of the politicians eager to tax more) commonly take advantage of legal avenues which shelter their assets from these laws, (such as by way of ironclad Trust vehicles), proponents estimate this change would generate $50 billion in annual revenue for the state. However, what these geniuses fail to account for is the inevitable exodus of such wealth to more estate-friendly jurisdictions, like Florida, Nevada, and Tennessee. And if the feds file suit, that will ultimately lead to the wealthy boarding their private jets and yachts, and expeditiously relocating to less taxing shores.
Hopefully, federal and state policymakers will spend a bit more of their efforts reducing wasteful spending and boondoggles, as opposed to taxing more – a policy which will only serve as a wet Band-Aid; one that will ultimately fail to stem the continued bleeding.