New legislation would combat a devastating estate tax penalty.
New York’s Out of Control Estate Tax
New York businesses are teetering on the edge of
Lawmakers are working to address the estate tax
cliff that is harming small businesses by levying heavy taxes against them
throughout the state.
The state’s 2014-15 budget included a provision
that would raise the New York’s estate tax exclusion amount to the federal
level—which is currently $5.25 million and increases annually with
inflation—from more than $2 million by 2019. But until
that year, individuals and small businesses face a steep penalty for exceeding
the exclusion amount.
As the law is written, estates pay brutal taxes
for going over the exclusionary limit. This is particularly harmful for small
businesses that might easily exceed that limit because of the large amount of
capital it takes to run a business, said E.J. McMahon, president of the Empire
Center for Public Policy.
Instead of simply paying a tax on the amount
that exceeds the limit, business pay a 164 percent marginal tax rate on their
entire estate if they go over it, McMahon said.
“You would think you’re only going to pay taxes
on the amount over the exclusion, but you’re paying on the whole estate,”
McMahon said. This leads to incredible losses for businesses that have to pay,
Assembly Bill 6419 would address this cliff by
reforming the estate tax so it is only applies to the amount that exceeds 105
percent of the exclusionary amount. McMahon said this will significantly
minimize the harm done to businesses by the estate tax.