The Bill, HF 2557, was heard in the Committee on Taxes on Apr. 3. John Phelan, the economist for the Center of the American Experiment, testified against the bill pointing out that “this bill proposes to do nothing at all for the poor. It will raise nobody’s wages. It only affects ‘the rich’”.
This bill would give Minnesota the second highest estate tax, often refered to as the death tax, behind the state of Washington, which unlike Minnesota, lacks an income tax. It would raise taxes to 16.8 percent on estates of $11.1 million or higher. Phelan states that this bill points Minnesota in the wrong direction as more states, like New Jersey and Delaware in 2018, are beginning to repeal their estate tax.
The revenue this bill would bring in “has to be measured against the incentive effect of tax revenues lost as people leave Minnesota to avoid the estate tax” Phelan states. He also points out the validity of this concern by using a 2013 survey by the Minnesota Society of Certified Public Accountants that found that “‘more than 86 percent of respondents said clients had asked for advice regarding residency options and moving from Minnesota’ Ninety-one percent said the number of clients asking about moving increased from previous years.
Phelan also sheds light on the inconsistency of Minnesota Democrats by exposing their policies on tobacco and alcohol, and how they don’t apply the same rationale to Minnesota taxes. They want to raise the legal age to buy tobacco to 21 and also increase the taxes on goods such as wine and cigarettes to de-incentivize their use because as former Governor Mark Dayton says “Incentives do make a difference”. Phelan concludes by saying “You have to apply that logic consistently, even in the case of the estate tax”
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