Every once in a while (admittedly not often in this author’s opinion) do our elected officials get tax policy right. There just seems to be too many special interest groups clogging up the essential arteries of our nation’s government.
However, in October of this year, Governor Andrew M. Cuomo announced the formation of the Tax Relief Commission. Its aim: “devising a series of targeted tax relief proposals” to lower the tax burden(s) of living and doing business in New York State. Quite admirable in scope, but obviously not an entirely unique aspiration. Skeptics among us (myself included) might just think that many of the proposals contained in the December 2013 report (ranging from property tax relief to lowering corporate tax rates) are nothing more than frivolous thinking during the holiday season – that maybe its authors are inebriated with the illness known as “wishful hoping.”
But one part of the Commission’s Report, that dealing with New York State’s Estate Tax Reform, makes for common sense.
First a few facts:
- New York remains one of only 17 states that still imposes an estate or inheritance tax.
- According to the report, only “two other states have an exemption below that amount”.
- While the Federal Estate exemption is currently $5.25 million for U.S. citizens (soon to be $5,340,000 as of January 1, 2014), the estate exemption for New York State has been stuck in the mud at $1,000,000. Translation: This means that many of those hard working New Yorkers who have escaped a federal tax find themselves (& their heirs) potentially subject to an antiquated tax regime if their gross estate exceeds $1,000,000. The Commission’s Report hits the nail on the head when it states:
“With rising home values and a healthy equity market, many middle class households are subject to New York’s estate tax, while owing no federal estate tax. In addition, there are concerns that the low exemption level may serve as a factor in taxpayer migration from New York to other states (e.g., Florida) that do not impose an estate tax.”
- Equalize the State exemption with the Federal exemption of $5,250,000.
- Similar to the federal exemption, the Commission recommends that this figure be indexed each year.
- The report recommends lowering the top New York State estate tax rate to 10%.
And finally, not to be forgotten (as it seems to weave its way into all estate tax debates), is the Commission’s comments that adopting these changes in New York State’s tax regime will help “protect family farms”!