fbpx

Latest Posts

Home

Facebook

Twitter

Search
About

The Cost of Minnesota’s Estate Tax

Executive Summary

Minnesota taxes estates more heavily than most states. It is one of only fourteen states plus the District of Columbia to levy an estate tax. Eight of those fourteen states and the District of Columbia have a higher exemption. Th e state’s starting rate of estate taxation—12 percent—is higher than any of the other jurisdictions that levy one. Its top rate is 16 percent. Only the state of Washington has a higher top rate.

Some individuals will take steps to avoid paying the estate tax. There are many legal avenues open to those who wish to do this. They can divest assets prior to death by sale or donation. They can also leave the state for a jurisdiction with a lower rate or no estate tax at all. This is very easy in the U.S. There is a wealth of evidence that all of these methods are utilized to lower estate tax burdens.

In 2013, the Minnesota Society of Certified Public Accountants surveyed their members and found that “more than 86 percent of respondents said clients had asked for advice regarding residency options and moving from Minnesota.” Ninety-one percent said the number of clients asking about moving increased from previous years.

Minnesota’s estate taxes brought in $183 million in revenue in 2016, 0.8 percent of the state’s total income. But this revenue effect has to be measured against the incentive effect of tax revenues lost as people leave Minnesota to avoid the estate tax.

Using survey evidence and official data, we are able to estimate the income tax and sales and excise tax revenue the state of Minnesota loses when people leave to avoid the estate tax. If two thirds of 55 to 65 year olds and 80 percent of those over 65 who left because of state taxes left because of the estate tax, then the tax was a net revenue loser for the state government in every year from 2012-2013 to 2015-2016. Over that period, the estate tax cost Minnesota’s government $69.1 million in lost revenue, $47.3 million in 2015-2016 alone.

The 2017 tax bill raises the federal estate tax exemption from $5.6 million to $11.2 million. This is likely to intensify the competition between states and put pressure on those, like Minnesota, with estate taxes at high rates, either to abolish them or, at least, raise their exemption to the new federal level.

Comments

Subscribe

Categories

Upcoming Events

  • Morning in Minnesota: Red Wing

    Location: St. James Hotel 406 Main StreetRed Wing, MN 55066

    Please join Center of the American Experiment on Tuesday, December 17th at the St. James Hotel for a free breakfast with Center policy fellow and education expert, Catrin Wigfall as she explains the Center’s “Great Jobs Without a Four-Year Degree” project.

    Register Now
  • NEW DATE: Nov. 25th Twin Cities Reception with Andrew C. McCarthy

    Location: Metropolitan Ballroom & Clubroom5418 Wayzata Boulevard, Golden Valley, MN, 55416

    Please join Center of the American Experiment and National Review Institute for a reception with Andrew C. McCarthy, a former top federal prosecutor, a senior fellow at National Review Institute, a contributing editor at National Review, a Fox News contributor, and a well-known commentator on legal, national security, and political affairs. His new book, Ball of Collusion, is a story about what happens when those we trust to be the guardians of our system anoint themselves the masters of our system. For our own good, of course. As for collusion, that word we’ve heard so incessantly from pundits and leaky…

    Register Now
  • NEW DATE: Nov. 25th Rochester Lunch Forum with Andrew C. McCarthy

    Location: Hilton Rochester Mayo Clinic Area10 East Center Street, Rochester, MN, 55904

    Please join Center of the American Experiment and National Review Institute for lunch with Andrew C. McCarthy, a former top federal prosecutor, a senior fellow at National Review Institute, a contributing editor at National Review, a Fox News contributor, and a well-known commentator on legal, national security, and political affairs. His new book, Ball of Collusion, is a story about what happens when those we trust to be the guardians of our system anoint themselves the masters of our system. For our own good, of course. As for collusion, that word we’ve heard so incessantly from pundits and leaky government…

    Register Now