There were a lot of things I disliked about the budget Governor Carcieri recently introduced.  I was also hopeful about having substantive changes to our tax code, but that also appears unlikely.  Instead, we have a proposed phase-out of the corporate tax, reduced deductions, an increased earned income credit, and worst of all, an average tax increase of more than $1,200 on more than 100,000 Rhode Islanders.  While the budget is terrible, there is at least one thing that made sense: The threshold for the estate tax possibly being increased.

     Progressives are working themselves up in a frenzy about this, but it is a change that is long over due.  The estate tax (or death tax), kicks in on estates valued at $675,000 or more.  Not only is this the lowest amount in the country, but it also has gone unchanged for 8 years.  I have seen proposed thresholds ranging from $1million to $3.5 million.  The state should raise this level to at least $1 million then index it to inflation so that more assets are protected from taxation. 

     As you can imagine, this isn't a popular subject with progressives.  Kate Brewster of the Poverty Institute thinks we should confiscate as much hard earned wealth as possible:

The estate tax “must be preserved to maintain a progressive and balanced tax structure,” she told the committee. Increasing the threshold to $3.5 million would make Rhode Island stand out among its neighbors — the Massachusetts threshold is $1 million, Connecticut’s $2 million, she said.

“This proposal is unaffordable and fiscally irresponsible, especially given the lack of evidence that it will provide an incentive for people to stay or locate in the Ocean State,” Brewster said.

 
     I think raising the threshold would entice more people to stay in Rhode Island in their older years, but I don't think it would be a huge number.  I don't think this change will automatically make Rhode Island a magnet for the wealthy.  What I do think is that it is the right thing to do.  I know that people like Ms. Brewster like to refer to middle class and poor people as "working people" or "hard workers", while insinuating that individuals with a high net worth do nothing but play golf all day.  Not only did most of these people work hard in their lives, but they also paid taxes at a much higher rate throughout their lives to support all the pet programs that people like Kate Brewster support.  Raising the threshold isn't a matter of economic development, it's a matter of fairness.


http://www.projo.com/news/content/BZ_tax_proposals_03-12-09_MNDLBQ9_v11.30aa4ce.html