The Register Citizen (Torrington, CT)
More lawmakers seek end to estate tax on wealthy
For years, minority Republicans in the General Assembly have fought to repeal Connecticut’s tax on inheritances of the wealthy.
This year they are not alone. A growing number of Democrats want the Legislature — and Gov. Ned Lamont — to repeal the tax.
And while Democrats from Connecticut’s affluent southwestern corner are calling for repeal, they aren’t the only Democrats open to the idea. Even some of the party’s most progressive members are willing to let go of the tax — provided repeal can be traded for some other budget initiative.
“It’s just a very shortsighted policy,” said freshman Sen. Alex Bergstein, a Greenwich Democrat, who argued the tax raises “a pittance” while “sending a signal that we don’t want high-income earners here.”
“At the end of the day,
not all Democrats are the same,” said Sen. Will Haskell, D-Wilton, also serving his first term. “It’s a bigtent party and I come from a district where, when I knocked on doors, I heard a lot from retirees telling me Connecticut simply is not the most affordable and exciting place to grow old.”
At issue is a tax that currently applies to estates valued at $3.6 million or more.
The exemption grows to $5.1 million in 2020, $7.1 million in 2021 and $9.1 million in 2022.
In 2023, Connecticut’s estate tax exemption would match the federal limit, which currently is about $11.4 million and is indexed annually for inflation. Under current levels, the federal estate tax exemption would revert in 2026 to its 2017 level of about $5.5 million.
But critics say the damage done by the Connecticut tax lies as much in perception as in reality.
“Why keep … an estate tax when we are one of only 13 states with it?” Bob Patricelli and Jim Smith co-chairs of the state Commission on Fiscal Stability and Economic Competitiveness, wrote in a November op-ed, adding that it has “no place in a progrowth agenda.”
It’s debatable whether the tax raises “a pittance,” as described by Bergstein, but it is a relatively small piece of the General Fund’s $19 billion revenue schedule.
The tax is projected to raise just under $200 million this fiscal year, or 1 percent of the General Fund, according to the Legislature’s nonpartisan Office of Fiscal Analysis.
Compared with the budget’s workhorses, estate tax proceeds equal 1/50th of the $9.7 billion the income tax produces and 1/22nd of the $4.3 billion sales tax stream.
It’s exceeded by taxes on corporations, cigarettes, public utilities, insurance companies and real estate conveyances.
And the annual take from the estate tax is projected to drop to $155 million next fiscal year and $134 million the year after that.
Still, it raises more than three times what Connecticut’s alcohol tax does.
Only 656 filers paid the estate tax last year — when the limit was $2.6 million, according to the state Department of Revenue Services. And that number is likely to shrink as the exemption level continues to rise.
So why should Connecticut give up more than $100 million in annual revenue to provide a tax break for a few hundred households?
Connecticut’s fiscal problems stem chiefly from public-sector pension and other retirement benefit programs that were underfunded for decades, Bergstein said. But as these problems place growing pressure on state finances, she said, it’s become increasingly commonplace to vilify the wealthy.
“We need to really see people as individuals and not as just ‘the rich,’” Bergstein said.
Rep. Chris Davis of Ellington, ranking House Republican on the Finance, Revenue and Bonding Committee, says the tax is costing Connecticut tax receipts — and jobs.
Though Davis agrees with Bergstein and Haskell that some wealthy residents have left — and will continue to leave — the state to protest the estate tax, it also discourages family-run businesses from locating here.
This is particularly a problem for family farms, he said. “They are landrich and cash-poor and many have to literally sell the farm to pay the tax man.”
Lamont, a Democrat, largely avoided the estate tax issue during the 2018 campaign while his Republican opponent, Bob Stefanowski, included its repeal on a controversial agenda that also included a gradual phase-out of the entire state income tax.
On Nov. 4 — two days before Election Day — Lamont attacked estate tax repeal as part of a larger repudiation of Stefanowski’s income tax scheme.
“Eliminating the income tax and the estate tax will be an enormous giveaway to the very wealthiest while slashing 60 percent of the revenues that fund education, health care and infrastructure investments,” Lamont’s campaign wrote.
But since then, some things have changed.
First, Democrats gained several seats in Fairfield County legislative districts.
Second, the state’s budget reserves, which stood at $200 million one year ago, now approach $1.2 billion — and threaten to top $2.1 billion by the fall.
And finally, some Democratic supporters of the estate tax have expressed a willingness to be flexible on repeal.
Rep. Jason Rojas, an East Hartford Democrat and co-chairman of the finance committee, said few in his community worry about estate taxes, but many worry about the sales tax. (Lamont has said he wants to broaden the sales tax base and remove some exemptions.)
Still, if repeal of the estate tax could come with other tax or spending changes that promote greater fairness, Rojas said, he will consider it.
“If we’re going to reshape Connecticut the way the governor is talking about, then everybody is going to have to re-look at things they said on the campaign trail and the values they hold deeply,” he said. “Everybody’s going to have to do some soul-searching.”
Senate President Martin M. Looney, D-New Haven, also would not rule out repeal, saying he also would judge the issue only in the context of the entire state budget package.
Salvatore Luciano, president of the Connecticut AFL-CIO, said repeal should remain on the table if it could lead to a more progressive state income tax system being adopted before legislators adjourn in early June.
“I don’t know what will happen, but maybe part of the grand bargain to have the wealthy pay a little more of their fair share (of the income tax) will be to get rid of the estate tax,” he said.
The Lamont administration isn’t offering any hints about whether it is considering a repeal of the estate tax, or even any further reductions.
Chris McClure, spokesman for the governor’s budget office, said “Gov. Lamont’s revenue proposals will reflect his best efforts to promote economic growth, alleviate burdens, and create more market parity — while also balancing the budget for the biennium and putting the state on the best path forward into the next decade.”