Letter to the editor submitted b Sean Goldrick, March 15, 2017
In a recent oped, Greenwich’s Republican general assembly delegation demanded the elimination of the estate tax, charging that the tax is responsible for “decades of (economic) decline.”
The delegation, including representatives Livvy Floren (who also represents western Stamford), Mike Bocchino, Fred Camillo, and state senator Scott Frantz (who also represents parts of Stamford, Darien, and New Canaan), claims that “Connecticut has an estate tax with a very low threshold of $2 million. It is difficult to retire comfortably when residents are taxed beyond their working years.”
Senator Frantz, himself a beneficiary of significant inherited wealth, has introduced bills to eliminate both the estate (SB 58) and gift taxes (SB 62), while Mike Bocchino has introduced similar bills (HB 5518, HB 5510) in the state house.
You can be forgiven for being shocked at the proposal to cut taxes on Connecticut’s wealthiest residents when the state is facing a serious budget deficit and struggling to fund teacher pensions and basic services. Leaving aside the bizarre equating of death with the period “beyond working years,” here are the facts.
Fully 20 states levy estate, inheritance, and gift (“EIG”) taxes. In the northeast, every state from Maryland to Maine, with the lone exception of New Hampshire, levies EIG taxes. Contradicting the Republican delegation’s claim, a study prepared for the Connecticut General Assembly by professors Karen Conway and Jonathan Rork concluded that “Connecticut has among the lowest estate tax burdens in the Northeast region, with a higher exemption, lower maximum rate and lower overall tax burden on large estates ($20 million) than almost all of the other states.” The report demonstrates that an estate of $20 million will incur a lower total estate tax in Connecticut than in any other state in the northeast. Further, Conway and Rork point out that Connecticut’s economic growth was higher before the state began reducing EIG tax rates.
Connecticut’s EIG receipts have fallen from a high of more than a quarter billion dollars in 2000 when rates were first reduced, to approximately $170 million annually. That represents less than 1% of the state’s total revenues. Yet eliminating EIG taxes would increase Connecticut’s projected FY18 budget deficit by 10%.
The Greenwich Republicans claim that the estate tax is to blame for wealthy residents’ leaving Connecticut. Yet Conway and Rork debunk that claim as well, citing numerous studies demonstrating that neither tax rates nor the estate tax has any demonstrable influence on out-migration, and showing that the main states to which Connecticut residents migrate are usually themselves high tax-rate states.
Why is it important to maintain the estate tax? It was Republican president Teddy Roosevelt who a century ago advocated for “a graduated inheritance tax on big fortunes”, which he believed was necessary “to preserve a measurable equality of opportunity.” A Center for Budget and Policy Priorities report claims that estate taxes serve as a “key tool for broad prosperity,” and that they “raise revenue for public services that build a stronger economy, protect against extreme levels of income inequality, and ensure that the wealthy cannot avoid paying taxes on certain forms of wealth.” A report by Connecticut Voices for Children points out that the estate tax is virtually the only tax that is paid by the wealthy only, and that most other taxes are highly regressive, with lower income residents paying substantially higher percentages of their income on state taxes and fees than the wealthy. Just over 500 tax returns in Connecticut are subject to the estate tax annually, less than eight per 100,000 population.
One can be forgiven for feeling that in a state with the second highest level of wealth inequality in the nation, it is crass and immoral to propose cutting taxes on the wealthiest residents, while forcing the middle class to pay more to close what would be a nearly $1.9 billion deficit.
Instead of demanding tax cuts for the wealthiest, Senator Frantz and the other local General Assembly Republicans should be demanding that the wealthiest residents of our state demonstrate good citizenship, and pay their fair share of the tax burden.
At a time of tight budgets amidst a recovery from the worst economic downturn since the Great Depression, General Assembly Republicans should not be foisting even greater tax burdens onto the shoulders of hard-pressed working families who are least able to pay more. Teddy Roosevelt would certainly agree.
Sean Goldrick served two terms as a Democrat on Greenwich’s finance board, the Board of Estimate and Taxation. He lives in Riverside.