Minnesota Lawmakers Considering Limits on Estate Taxes

Published On: 29th April 2015

From the internet

For years, Minnesota has been touted as an expensive place to die due to its estate taxes and now lawmakers in Minnesota are considering reducing the amount of taxes that are owed when higher earning residents die.

The $2 billion tax cut package by Republicans that control the House would more than double the amount of money Minnesotans would have to make before estate taxes would have to be paid. Currently, the existing policy states that estate tax kicks in when an individual makes more than $1.4 million. This amount is slated to increase in 2018 and the tax rates range from 9 to 16 percent. This affects fewer than 3 percent of the estates in the state.

If the new House bill passes, the threshold would be raised from $1.4 million to $2 million in 2015. The additional annual adjustments would then set the 2018 taxable amount from the expected $2 million to $5 million or even higher. Future increases would occur with inflation. The $5 million minimum for estate taxes would also be accompanied by a flat tax of 16 percent.

One rep describes the state as being an expensive one to die in due to the fact that Minnesota’s estate tax exemption doesn’t match the federal tax code. It has been found that some people move to other states to protect their assets.

Democrats are critical of the Republican proposed tax cuts. Republicans argue that the money has already been taxed and that some states don’t implement an estate tax.

It is said that many small business owners and farmers would benefit from the law change and not just those who are considered “rich.”

All in all, however, not many Minnesotans are affected, but if a farmer wants to keep a farm in the family and the farm is worth a lot of money (more than it generates in income), the family doesn’t want to have to sell off part of the farm so that the money can be given to the government.

Researchers estimate that fewer than 700 estates would have to pay for the estate tax. That is down from the current number of 800. However, the Department of Revenue has estimated that the two-year cost to implement an estate tax exemption would cost nearly $200 million. This has some lawmakers arguing that that $200 million could be better spent on other programs rather than another tax break. They state that it is another tax break for wealthy people, creating an unnecessary burden on the state.

There are other lawmakers that have stated that estate planning can help individuals when they wish for their families to keep the estate intact and minimize the Minnesota estate tax obligation.

Regardless of those lawmakers that challenge a change, there is sentiment that the estate tax needs to be improved, but that the current proposal is flawed.

Governor Mark Dayton is proposing a minor technical estate tax change in relation to farm property that may be involved in eminent domain. The cost to the state for this change is very minimal, but helps farmers.