NFIB is supporting an effort to eliminate the state Inheritance Tax
The Pennsylvania Inheritance Tax is the most onerous state death tax in the nation. It impacts anyone in the state who cautiously saved over the years to leave something behind for those they love, including many small business owners who worked hard all their lives to build a business to leave to their heirs.
In the past, NFIB’s support of exemptions for working farms and other small businesses in Pennsylvania succeeded, but the restrictions are too rigid, leaving many children and family members of business owners penalized unfairly when that person passes away. Under the small business and farm inheritance tax exemptions, heirs must keep the same business going for seven years after the death or the tax must be paid retroactively to the state. Many small businesses aren’t eligible for exemptions, and they are not exempt if the company has more than 50 employees.
NFIB also believes that the PA Inheritance tax is a form of double-taxation. Money left at death has already been reduced by income, real estate, or other taxes, paid during the life of the decedent.
Just six states still have an inheritance tax, and none but Pennsylvania and Nebraska still tax children and most lineal heirs. Nebraska’s rules are much more lenient than Pennsylvania’s. For example in Nebraska children are only taxed after the first $40 thousand at a rate of 1%. Pennsylvania charges children 4.5% after a child inherits more than 3500 dollars. Our state charges 12% to a brother or sister who inherits.
Under inheritance taxes, the heirs are responsible for paying the tax. Under another type of death tax, the estate tax, which is charged in some other states, the estate pays the tax before the distribution of assets. Twelve states have an estate tax, but they generally only apply to wealthy families. Most of those states and the federal government only tax estates under $11.4 million and the lowest exemption threshold is $1 million in Massachusetts and Oregon.
As you can see, Pennsylvania’s death tax is the worst in the nation, hurting many small businesses and middle-class families.
Pennsylvania’s Representative Greg Rothman (R-Cumberland) is sponsoring a bill to eliminate the state’s death tax in the current legislative session. Here is a video of Rep. Rothman speaking about his proposal. We will keep you up to date on that bill’s progress.
