Craven lauds hike in estate tax threshold
STATE HOUSE – When Rep. Robert E. Craven, at the opening of this year’s legislative session, introduced a bill to raise the threshold on the state’s estate tax, he said he did it to offer fairness to small business owners and individuals who own what might be considered “open space,” such as forest land or shoreline property.
Today, near the end of the General Assembly session, Representative Craven (D-Dist. 32, North Kingstown) is applauding House passage of a new state budget that adopts what was proposed in his legislation – a hike in the estate tax and elimination of the so-called cliff that requires heirs to pay taxes on the entire estate if it exceeds the set threshold.
“I compliment House leaders, the Finance Committee and our fiscal staff for making this a portion of the new budget,” said Representative Craven. “This is good for our state; it’s an economic boost for our state.”
“As I’ve said before, I believe our state’s unrealistic estate tax limit is part of the explanation for 24,000 people leaving Rhode Island during the past decade or so for more tax friendly locations. This tax is one of the least significant sources of revenue in the state budget, while at the same time hurting small businesses or moderate-income families who may have some land assets to pass on to their children. It is those individuals who bear the true burden of this tax.”
As a result of the Fiscal Year 2015 budget – passed tonight by the House and expected to be taken up by the Senate early next week – the estate tax (sometimes called the “death tax”) threshold will be raised from its current limit to $1.5 million. (While existing law set a threshold of $675,000 when it was enacted, that has grown today to about $921,000 as a result of annual adjustments tied to the consumer price index. Those CPI adjustments will continue to be applied to the new $1.5 million figure in future years.)
The increase in the estate tax threshold to $1.5 million is coupled with the elimination of the so-called cliff, which requires heirs to pay tax on the entire estate if its value is greater than the threshold that has been set. Under the new language included in the budget, any tax liability on an estate valued at more than $1.5 million will be applied only to the amount over the $1.5 million.
While providing some fairness, and tax comfort, to small business owners and the heirs of small to moderate estates, the change in the estate tax should help make Rhode Island a more tax-friendly state for those with significant estates. “When individuals leave this state for places such as Florida, simply to avoid this tax, the state loses tax revenue on the income and pensions of these individuals for the rest of their lives. I believe that is a more significant amount than the $32 million in revenue that the Division of Taxation says is generated annually by the estate tax.”
Representative Craven said that while he believes the estate tax threshold could have been raised even higher than the $1.5 million, he is pleased that this move has been made this year.
“We all know that the value of most things has increased significantly over the years,” he said. “The $1.5 million threshold if just and fair, I believe, and a more appropriate figure for today’s economic reality. This budget item is a fair compromise because the state can continue to collect revenue on more valuable estates but still play a role in saving small businesses and preserving open land and allowing Rhode Islanders who want to stay in this state to do so.”
Representative Craven, who is serving his first term in the House of Representatives, is the Chairman of the House Committee on Municipal Government and a member of the House Committee on Judiciary and the House Committee on Small Business.
For more information, contact:
Randall T. Szyba, Publicist
State House Room 20
Providence, RI 02903