Bi-Partisan Call to Raise Inheritance Tax Threshold
Kudos to State Rep’s Carol Mumford (R, Scituate/Cranston) and Peter Kilmartin (D, Pawtucket) for today’s op-ed in the ProJo in which they propose raising the Rhode Island inheritance tax threshold from $675,000 to $1 million.
Protection of assets acquired over a lifetime, coupled with a desire to leave the next generation a small inheritance, now preoccupies the middle class. Once the purview of the rich seeking to preserve their inheritances, tax planning is now causing middle-class people to vote with their feet…
Small-business owners and farmers, who are bound to Rhode Island, do not enjoy the luxury of this choice. Most businesses in this state are small operations employing fewer than 10 workers. Many are family-owned. When the owners die, their children who inherit are faced with financial dilemma. They must either sell the business to pay the inheritance tax or borrow an exorbitant amount of money to keep the business family-owned. These are the choices that hamper small Rhode Island businesses from growing one generation to the next.
They also make a good point about how the children of farmers are faced with paying an “exorbitant amount” of taxes to keep the farm or sell to developers. Additionally, to add a bit of irony, Mumford and Kilmartin point out that:
[A] strange dance occurs with groups wishing to preserve open space. These groups, financed with state and local tax dollars, move to purchase the development rights, so that crucial open space can be preserved and inheritance taxes can be paid.
Wouldn’t it be better to allow the families to continue farming from one generation to the next? It is shortsighted to collect inheritance taxes with one hand, and with the other to pass out state dollars to purchase development rights.
The same burden is imposed upon those who inherit long-held family cottages on the coast. And they continue:
In the best of all worlds, Rhode Island would eliminate the inheritance tax altogether.
If the tax were eliminated, median family income in Rhode Island would certainly rise. Small-business owners would be able to make long-term decisions knowing the next generation would profit. Small business could grow into a Rhode Island big business, employing far more than the current number of fewer than 10. The frugal members of the middle class who have amassed a small estate through hard work and a growing real-estate market would not be chased away. Family farms could remain family farms.
Would these problems completely disappear if the inheritance tax threshold were raised to $1 million? No, probably not, but it is a good beginning!
I’d think that if the House Whips for both parties are on the same page, legislation has a good chance of passing.