ST. PAUL, Minn. – Despite his disapproval, Gov. Mark Dayton signed into an increase in exemptions from Minnesota’s estate tax.
Minnesota is one of the 18 states which still has an estate/inheritance tax. Minnesota caps the tax rate at 16 percent, though even on the low end the tax sits at ten percent. However, anyone below $1.8 million in inheritance is currently exempt from the estate tax. The language added into the budget bill will raise this to $2.1 million for 2017, retroactively in effect January 1, $2.4 million for 2018, $2.7 million for 2019, and $3 million for 2020.
In a letter to the Republican leaders of the Minnesota legislature, Rep. Kurt Daudt (R-Crown) and Sen. Paul Gazelka (R-Nisswa), Dayton said:
“There is already a $2 million tax exemption for the estates of the wealthiest Minnesotans and a $5 million tax exemption for farmers and family-owned businesses. Increasing the regular exclusion by another $1 million would benefit only a handful of the richest people in Minnesota at a cost to the State of $34.8 million in FY 18/19, $74.5 million in FY in FY 20/21, and even more in years following.
“Whether the State Exclusion is $2 million or $3 million, those millionaires, whose preoccupations are to avoid paying taxes, will continue to find other states, who offer them better Estate Tax avoidance. It would require raising the exclusion to the federal level of $5 million to achieve parity, and that cost would be prohibitive. Reducing state revenues by $109 .3 million from the richest Minnesotans to little public benefit is extremely ill-advised.”
The outcome is a huge success for Republicans Forbes said because, “as Republicans chip away at the state estate tax, it brings in less and less revenue and is then easier to kill outright.”