Friday, August 20, 2004

Jeffrey Cooper, John Ivimey & Donna Vincenti have published State Estate Taxes After EGTRRA: A Long Day’s Journey Into Night, 17 Quinnipiac Prob. L.J. 317 (2004). Here is the Conclusion:

The passage of EGTRRA completely altered estate taxation in America. Yet, perhaps the most fundamental change, the repeal of the state death tax credit, is far from the most obvious. Rather, amid the tax rate cuts and increasing exemptions of EGTRRA lay a revenue provision designed to eradicate tens of billions of dollars of state tax revenue and redirect those funds to the federal government.

EGTRRA’s impact on state taxes did not go unnoticed. State legislature by state legislature saw the issue and enacted new estate tax laws designed to recoup the lost revenue. In these states, budget gaps closed. Revenue was saved, at least for now. But simplicity, uniformity, and clarity were lost. Perhaps forever.

As state after state decouples from the federal tax, state estate taxes revert to their pre-EGTRRA levels. The repeal of the state death tax credit ends up meaning little from a state revenue standpoint; largely the same taxpayers end up paying largely the same state taxes. Yet, the simplified method of calculating and collecting those taxes is replaced by a piecemeal progression of new state tax legislation, new tax forms and procedures, and new estate planning considerations.

In 2001, a veil of fog descended upon the field of estate planning. In 2011, if not before, it will lift, revealing a familiar landscape. Until then, the fifty states are left to navigate their own way down the path of estate taxation, making long, confusing, journeys just to return to where they once were. In the literature of tax legislation, this is no doubt a tragedy.