The Jan. 15 op-ed, “Minnesotans are fleeing to avoid estate tax, so repeal it,” presented some dubious support for its conclusions. States have the right to impose taxes, including estate taxes. But politics get involved, and the welfare of the general population can get lost in the process.
To support his arguments, the column writer quoted two economic researchers stating that high taxes can provoke taxpayers to move to areas with lower taxes. However, the quoted study seemed to identify taxes in general and not just estate taxes. To take conclusions about taxes in general and apply them to only one factor in the group results in questionable logic. Could not people move to another state if they are unhappy about their present property tax rate?
The writer then compared the estate tax rate in Minnesota (13% to 16% on the net estate amount over $3 million) with 12 other states that have the tax and the remainder that don’t. He said Minnesota’s rate is high and the exempted amount is low. In looking only at the estate tax factor of the 12 taxed and other states, the amount of total taxes paid by taxpayers was not mentioned. The comparison of those moving away lost its usefulness. It is conceivable that the resulting taxes in some other states are higher in different categories.
Furthermore, the writer used information from a survey of clients of the Minnesota Society of Certified Public Accountants to support a claim that Minnesota is losing population and tax money because taxpayers move away. However, what is the probability that the opinions of this group represent the general population? Could it be that people with more money are more likely to move than those with less? Perhaps any conclusion about money loss should be limited to that group.
Then the writer concluded that the estate tax should be rescinded. However, this is only one option. The exempt amount could be reduced from the present $3 million. Or the tax rate could be increased from the top rate of 16% to increase collections.
How could these be justified? An important issue is that average salaried workers in the U.S. pay a marginal income tax rate of 24% (in 2018). The workers earn their salaries. Estates of less than $3 million, going to heirs, would pay no estate tax. It is conceivable that adult heirs receiving the estate would have done nothing to earn the benefit. Even over $3 million, the highest rate is 16% in Minnesota. Should lower- and middle-income workers be taxed on income and wealthy, non-working adult heirs not? This adds to the tax-fairness issue.
Collecting more taxes could benefit Minnesota’s budget. Moreover, the problems of inequality in income and wealth are simmering political time bombs. Because tax policies favoring the wealthy, developed in the early 1980s, were a major factor in developing the inequalities, improving tax policies should have high priority for our federal and state governments.
Changes to tax policy under President Donald Trump mostly benefited the wealthy and large corporations (including himself). Adjusting the estate taxes nationwide could be a small start to get money for domestic financial and social needs.
Donald E. Maypole taught at three different universities in the U.S. after retiring from the University of Minnesota Duluth and taught at five different universities in Europe.