Replace Inheritance Tax Exemption for Business Assets With Higher Inheritance Tax Rate

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I don’t like that Melissa Daniels uses the Frank Luntz-coined pejorative “death tax” to refer to the inheritance tax in a straight news article. The term makes no sense. You’re not taxing the dead person, you’re taxing wealthy heirs.

Anyway, there’s a bill in Harrisburg with some bipartisan support that would exempt business assets from the state inheritance tax. If your mom and dad want to pass down the family business to you, you wouldn’t pay taxes on that. I’m open to persuasion that this is a decent idea, but like Margo Davidson, I’d be concerned about the revenue loss:

State Rep. Margo Davidson, D-Delaware, voted in favor of the exemption proposal, calling the inheritance tax on small businesses “subversive and burdensome” to families. But she voiced concerns about the piecemeal way that business tax reform seems to be evolving in Pennsylvania, at a time when “school district budgets are being slashed” and the state struggles to take care of vulnerable residents.

“I do believe that we really need to take a look at how we’re doing this tax reform,” she said, suggesting that lawmakers look at a package of tax reform bills simultaneously.

State Rep. Rick Mirabito, D-Lycoming, also supported the inheritance tax exemption. He suggested lawmakers find other places, such as the hotel occupancy tax, to make up the difference.

“We may have to consider some bills that raise other taxes,” Mirabito said.

Unlike Rick Mirabito, I don’t see the need to go looking for other taxes to replace this revenue. Just raise the inheritance tax rate to make up the difference, and then some.

The inheritance tax is a great tax. It doesn’t hurt the economy at all when we skim off a big chunk of the inheritance flowing to wealthy heirs. This is one of the least economically destructive ways we can raise revenue to fund public services, so it makes sense to raise as much money as we can from inheritance before we start thinking about taxing beneficial stuff like work and sales.

This entry was posted in Miscellany.

4 Responses to Replace Inheritance Tax Exemption for Business Assets With Higher Inheritance Tax Rate

  1. tgb says:

    another reason to domicile in flordia and leave pennsylvania as a resident. Once you get a “progressive” income tax you will see a flury of real estate into sarasota, naples, and other beach communities.

    • Jon says:

      There’s more to life than taxes. If PA has high job and income growth in its metros and great schools, people will pay the progressive income tax.

  2. tgb says:

    The outflow of talent post college is from a killer corporate net income tax rate. As to progressive tax rates their existence is why the poconos have grown at the expense of new york and new jersey. Instead of growth you end up with a lot of politically connected unaccountable koz warehouses along i81 and i80 and in southern pa that pay $10 to $12 per hour with little or no benefits. Lets face it there is no good reason to start a business in Philadelphia. If there was they would be filing a lot more income tax returns. That is why the Obama vote was so strong, they dont want to lose their source of support. Instead of taking on the major issues in Pa. you have a govenor, house , and reps who are more worried about selling state stores, the lottery, and voting fraud then working on the economic issues that would bring back industry to pennsylvania. They have squandered any political capital they have.

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