Death & Taxes: Death to Delaware’s Estate Tax?

Bloomberg BNA · June 13, 2017 · Jerry Gianakis

Delaware has become the latest state to try putting its estate tax on the chopping block. On May 18, the state’s House of Representatives passed H.B. 16, a bill that would repeal the tax effective Dec. 31, 2017.

This measure looks to be in line with the increasing progression of states rescinding their estate taxes, as previously detailed by Bloomberg BNA’s Chreasea Dickerson. By the start of 2018, only 13 states and the District of Columbia will impose such a tax. However, for Delaware to become the latest state to join this trend, the bill must get through the state Senate and be signed by the governor. These hurdles may prove difficult, as the bill faces resistance.

The bill’s opponents believe repeal of the tax would cut off a valuable source of funding for the state. Delaware is “in the middle of a $400 million budget deficit and cannot afford to squander revenue opportunities … that are needed to support state services,” Delaware Rep. John Kowalko (D) told Bloomberg BNA June 7, 2017, via email. “Repeal [of the estate tax] is a shortsighted pandering to the wealthier people in the state who have benefitted from the opportunities in Delaware,” he added.

On the other hand, supporters of the bill claim that the estate tax ultimately results in a loss of revenue for Delaware. Delaware Rep. Michael Ramone (R), the bill’s primary sponsor, believes that the tax has “cost[s] the state money because it has prompted wealthy individuals to move out of state, resulting in a loss of personal income tax revenue they would otherwise have paid,” according to The Republic’s coverage of H.B. 16’s progress.

The amounts collected by Delaware’s estate tax vary greatly year-to-year and appear difficult to predict. To illustrate, Delaware’s estate tax receipts totaled $16.2 million in 2011, dropped to $1.3 million in 2014, and rose to $9.3 million in 2016. In 2017, receipts are projected to fall to $2.5 million, according to the Delaware Economic and Financial Advisory Council.

This is not Delaware’s first attempt to do away with the estate tax. In June 2009, Delaware enacted legislation that set a July 2013 sunset date for the tax. However, in March 2013, before the provision took effect, the governor signed a bill into law repealing the sunset provision, allowing the tax stay alive.

Only time will tell if Delaware’s latest attempt to repeal this tax will ultimately prove successful.

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