Minnesota death tax poses a threat to family savings, inheritance
Minnesota residents have the distinction of being one of the most heavily taxed among the 50 states and the District of Columbia.
How’s that possible?
Well, I think a piece in The Wall Street Journal describes it best: “The grand prize for self-abuse goes to Minnesota, which this year enacted a new 10 percent gift tax with a $1 million exemption. A gift tax is a levy on money given away while the giver is alive. This tax is in addition to Minnesota’s 16 percent estate tax. The new law is all the more punitive because it applies the 16 percent estate tax (6 percent on top of the earlier 10 percent gift tax) to any gift within three years of death.”
This is a tax on estates that the federal government already taxes at 40 percent for estates over $5 million.
In essence, this is a tax on money that has already been taxed by the federal and state governments. Double taxation.
So, our multi-millionaire governor (heir to Dayton’s department store fortune) knows, first hand what inheriting a lot of money is all about. I wonder what rate he paid when millions were left to him?
In The Wall Street Journal’s opinion, Dayton “knows a lot about inheriting wealth but not much about creating it.”
The argument against a death tax is strong. A study by economist Larry Summers, President Obama’s former chief economist, concluded that the death tax amounts to less than 2 percent of the federal revenue and “discourages lifetime savings.”
Summers concluded that successful people who have accumulated wealth through investing and building businesses save money in their later years to leave to their heirs as a legacy. If taxes are raised on those who create wealth, the incentive to do so will be less and reduce the tax revenue anticipated by states like Minnesota who’ve calculated income from such taxes.
So what happens when a wealth creator is hit with more taxes in Minnesota? He or she moves to Florida, Texas or other states that have no desire to double tax their wealth. That in effect, pulls money and wealth from the state. According to The Center for the American Experiment, nearly $3 billion of income has been lost to the state because Minnesotans opted to move to Florida and Arizona. This, ultimately, will lead to a net loss of revenue for the state. That’s just not a smart move on the part of the tax-heavy state government.