Blogs Derek's Tax Blog Washington State Considering Doubling its Estate Tax
If enacted Washington residents could be paying in excess of 75% in estate taxes. Currently Washington State has some of the highest state estate rates in the country. Today we have a $2 million exemption, with a 10% tax that climbs up to 19% at $9 million and above. However, HB 3184, which was proposed on February 13, 2010, would double the tax rates to a 20% estate tax for estates larger than $2 million, up to 38% for estates at or above the $9 million level.
Washington State, like many, is feeling the economic pinch of the recession and is desperate to find new revenue. The legislature recently passed a rules change paving the way for new taxes and it appears an estate tax increase will be one of the first to be considered. This move shouldn’t surprise anyone. A few years back Washington voters rejected a citizens’ referendum to repeal the state estate tax and thereby singled to the politicians that the estate tax is a relatively popular tax, at least in Washington State. The 2010 repeal of the Federal Estate Tax has created a tax vacuum that the states will be quick to fill.
Unfortunately for Washington residents, the repeal of the Federal Estate Tax is not likely to be extended. Nearly a third of this year’s proposed budget will need to be borrowed. Tomorrow President Obama will announce the creation of his deficit commission. Although the results of the commission are months away; the announcement is likely to increase the attention on spending and tax policy ahead of this year’s mid-term election. Absence congressional and presidential action on Federal Estate Tax cut for next year, the tax will revert to a $1 million exemption and a top rate of 55%.
Since it is easy to avoid this tax by moving to another state, an increase in the state estate tax is shortsighted by the legislature. For other reaction to this bill, please see this Investment News article.