Rhode Island is one of a minority of
twenty states that impose an estate and/or inheritance tax. In addition, Rhode
Island currently has among the highest estate taxes in the country with a
$921,655 ‘disappearing’ exemption. House Bill No. 7064 would increase the
exemption to $2,000,000 effective January 1, 2015, and adjust the exemption to
inflation. Compared to other states, Rhode Island would still have one of the
highest estate tax burdens in the country, but House 7064 would certainly
continue the state on the path heading in the right direction to ideally match
the current federal estate tax exemption of $5 million. Finally, the bill would
eliminate the “cliff” whereby estates that exceed the exemption amount are
currently assessed tax from the first dollar. With House 7064, only that
portion of the estate exceeding the exempt amount would be subject to tax.
When fully implemented the estimated
annual cost of less than $25 million for reducing the estate tax is a small
portion of the annual budget. The change in the law would also likely result in
the retention of high income taxpayers and their estates in Rhode Island
helping the change to pay for itself. And the change would positively impact
the state’s business climate, the attitudes of small business owners toward the
state, and the state’s national reputation relative to its friendliness toward
business.
House Bill No. 7064 addresses this
inherent inequity of the estate tax to small business owners and farmers whose
assets are tied up in land, buildings, equipment, and other non-liquid assets.
The bill recognizes that the estate tax can force families of deceased small
business owners and farmers to make difficult business decisions that can
adversely impact the owner’s family as well as employees and their families because
the assets are illiquid. The bill seeks to reduce the financial pressure to
convert agricultural land to non-farm use or to sell a small business and to
mitigate the unique issues that the estate tax presents to those who own their
own business.
