There is an effort underway to repeal the Vermont estate tax changes that were implemented last year. This tax, which affects a tiny fraction of Vermont estates, has its origins in the early part of the 20th century, and was supported by some of the era’s wealthiest Americans because they thought it was unwise to allow tremendous amounts of wealth to remain in the hands of just a small number of American families.
At a Senate Economic Development Committee meeting in Burlington this past Thursday, a representative of the state’s CPAs said the estate tax frequently affects “middle class” people. This sounded a little strange, since at the federal level, only 2% of all estates are subject to any estate tax.
So I dug into the Vermont Department of Taxes data to explore the number of estates actually taxed in VT the last couple years. The number of estates and tax generated is below…
YEAR ESTATES TAX GENERATED
2007 114 17,798,143
2008 104 15,696,389
Under the table in the Tax Dept report, it says “Most estates are either not required to file returns or file returns with no payment due.“
Obviously these estates were taxed under the previous tax regime so it’s not a direct comparison. But as I look at these, I draw the conclusion that because only estates valued over $2M were taxed at all, the combined value of the estates in VT in 2008 was NO LESS than 2M x 104 estates = $208M. To actually reach the tax generated, an additional total estate value of $34.9M would be necessary. So the combined worth of the estates was $242.9M, with some only being taxed a small amount (those just over $2M) while some generating much more. Spread over all estates, this represents an effective tax rate of 6.5%. And that’s not including any gifts given to dependents during the estate planning process, when a significant portion of estates are distributed in a manner that avoids any taxation whatsoever.
We all use middle class as a term to reflect a specific group of people we have in mind, but I confess that I have a hard time viewing these estates as those of any “middle class” people I know…
I cannot support repeal of the estate tax for the wealthiest among us precisely because it’s middle class taxpayers who will, as always, have to bear an ever-larger tax burden to make up for the revenue loss.