Estate Tax Changes Would Make Maryland A Better Place To Die Rich
Death and taxes, as the saying goes, are the two you just can’t avoid. But the estate tax – what many conservatives call the death tax – could soon be something many fewer Marylanders have to pay. A proposal to raise the level at which the tax kicks in is being considered by House and Senate committees in Annapolis later today.
Maryland has one of the highest estate taxes in the country. Forbes magazine even named Maryland in an article about where not to die in the U.S.
Mike Miller, president of the Maryland Senate, is worried it’s forcing wealthy residents to flee for less-taxed pastures.
“We have a great state. We have a lot of assets, People are able to accumulate a lot of assets,” Miller said. “But their accountants, their estate lawyers are telling them to move, before they die.”
In Maryland, if your assets taken together are worth more than $1 million when you die, you’re on the hook to pay the state’s estate tax.
It used to be, pretty much every state had an estate tax, but over the years most states have gotten rid of them. Now, estate taxes are more the exception than the rule.
So to keep up with Virginia and Florida and the many other states with a lower estate tax –- to keep Maryland competitive, estate-tax-wise -- Miller is sponsoring a bill to gradually raise the exemption rate to match the current federal standard.
Under the legislation, instead of kicking in for estates worth $1 million, the estate tax would only apply to estates worth more than $5.3 million, which means fewer people would have to pay the tax.
“What we need to do is say look, we love you, you made your money here in Maryland, we want to keep you here in Maryland and we don’t want you to feel penalized because you’re staying here in Maryland,” Miller said.
Miller’s counterpart in the House, Speaker Mike Busch, introduced the same bill in his chamber.
Annapolis lawyer Frank Campbell helps people set up their estate plans, and he says many of his clients are are frustrated by the tax and the complexity it causes.
“Just the planning for a fairly modest estate can get unnecessarily complicated because the Maryland threshold is so low,” Campbell says.
Campbell says that the million-dollar threshold is not actually very high. Estates include houses as well as life insurance and retirement accounts, which puts many over the limit. “It does sound like a lot but it really adds up quite quickly for a lot of folks,” he said.
But frustrating as Maryland’s estate tax may be for his clients, Campbell says he doesn’t see too many people packing U-Haul and heading for Virginia.
“I think I’ve had more clients talk out of frustration that I’m going to pack up my bags and leave, than have actually done it,” Campbell said, noting that only a couple clients came to mind who’d left the state specifically for lower taxes.
Kate Planco Waybright of Progressive Maryland says the Free State actually has the highest number of millionaires per capita in the country. And that rate has been growing since 2006, not dropping.
“Report after report shows that tax flight is just a myth,” Planco Waybright said.
Right now, only about 3 percent of Maryland estates are big enough to get taxed, according to the fiscal note on Miller's bill. All told, revenues from the tax make up about one percent of the state’s general fund.
So Planco Waybright says the move to reduce the number of Marylanders who have to pay the tax is just election-year handout to the wealthy – one she’s disappointed so many Democrats are supporting
“There are 594,000 Marylanders who are still living in poverty,” she said. “And the fact that this is the type of policy that so many strong democrats have signed their name up to as supporting is just so hard for me to believe."