In case you missed it, Bloomberg BNA in its Weekly Round-Up has a recap of John McManus’ recent article for the publication’s Weekly State Tax Report that provides an in-depth look at several of the estate and gift tax regimes cropping up across states. The story, “Weekly Round-Up: Will More States Climb Aboard the Gift Tax Bandwagon?” conveys that states are exploring strategies to create new revenue by expanding the footprint of taxation. Pointing to advice from McManus, the importance of staying informed about wealth transfer taxes is emphasized.
Previewing McManus’ 2,500-word expert article, the piece briefly outlines the trend with states’ enactment of gift taxes, including Connecticut and Minnesota. Connecticut was the first state to impose a state gift tax on lifetime gifts made to others in 2005 and, in 2011, the state’s governor signed into law a new budget that “dramatically curtailed the ability to make tax-free gifts by reducing the state’s lifetime gift exemption to $2 million and taxing up to 12 percent on aggregate lifetime gifts exceeding that amount.” Effective as of July 1, 2013, Minnesota passed a law that established its own state gift tax with a gifting exemption that is limited to $1 million, in addition to adopting rules subjecting certain nonresidents to estate taxation.
What should be of concern to readers? From the story:
It is a significant concern that other cash-strapped states may follow the lead of Connecticut and Minnesota, McManus says. Those states that do charge an estate or inheritance tax experience diminishing returns when the property and assets that their residents gift during their lifetimes are not a part of the estate upon death. Many politicians view the imposition of a gift tax as a safer revenue-generating innovation, because most of their constituents would be unaffected by such a levy, McManus said.