For as long as I can remember, Republicans have been kicking and screaming about the “DEATH TAX”, also known as the inheritance or estate tax.
The estate tax is one of those taxes you hear about a lot, but probably won’t ever have to pay, unless your family is fabulously wealthy. Even then, there are ways around it, and the people that most likely have to deal with it have the money to hire lawyers and planners to help minimize the exposure to the tax.
Nonetheless, this is an issue that has captured the talking-points of Republicans and some Democrats since the dawn of the Republican Revolution. Citing the harm that could befall family farms and others, the specter of the estate tax has been used as a means to scare the dickens out of people that will most likely never have to deal with it.
So, its no surprise that in yesterday’s State of the State address, Governor Haslam proposed to cut the estate tax by $15m by raising the exemption from $1,000,000 to $1,250,000.
A quick look at the rules and regulations regarding the inheritance tax, as it is called in Tennessee, shows a graduated rate for estates of $1,000,000 and above. Basically, anything over $1.5m and you’re paying around 10% on the inheritance over $1,000,000. If you inherit an estate, in full or part, that is worth less than $1,000,000, you owe nothing in both state and federal estate taxes (though you may still have to file to prove that, consult a tax attorney to be sure).
That sounds like a lot of money, but the reality is, if your parent’s estate is worth $2m, and you have a sibling, you’re in the clear up to $2,040,000. You can do the math from there to see how many brothers, sisters, cousins, and ne’er-do-well hangers on you might need to avoid this tax depending on the size of your family’s estate.
One thing that no one really talks about is how many people the estate tax really impacts. I mean, we’ve been hearing about this thing for so long, and with such vitriol, that one might think its a whole bunch of people.
So I decided to call up the TN Dept. of Revenue and ask them just how many people actually pay the tax every year for the past three fiscal years. The individual on the other side of the phone didn’t have an immediate answer, so I gave him my email address and a couple of hours later, I had an answer.
The verdict: less than 1000 each year, or about .01% of the 6.8 million people in Tennessee every year.
Here’s how it breaks down.
|Average per Filer
Now someone out there is going to say that any amount is too much. Ok, you can believe that, but they’re also the same people that complain when roads aren’t paved, or the line at the DMV is too long, or the trash doesn’t get picked up…as if that’s magical or something.
The long hard reality is that people don’t pay anything on the first $1,000,000 they inherit. So if the average is about $112,000 per filer, each year, then these folks are inheriting more than $2.1 million dollars, which means they’re really only paying about 5% or less of their total inheritance in state taxes.
But we’re looking at the average here, when in reality we should probably be looking at the median. I didn’t ask what the median was. I’ll leave that up to some intrepid reporter that’s actually getting paid to research this stuff, but I’m pretty sure the median is going to be a lot less than this $112,000, with a few, very fortunate souls skewing the average with very large inheritances.
So who is really paying the tax…I mean, the bulk of it. Folks inheriting a whole lot more than most of us will ever make, see, or have any kind of access to.
This is billed as tax relief, and I suppose it is, on some level. But this is not the kind of tax relief that’s going to impact…well…anyone but the 1000 or less most fortunate people in Tennessee.
So, is this really tax relief? No, this is wealth relief.
2 Replies to “$15,000,000 For Fewer Than 900 People a Year”
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