by King Banaian, Peter J. Nelson, Patrick Testa
Center of the American Experiment
March 06, 2014
Prior to 2001, state estate taxes posed no additional burden on estates because a federal tax credit effectively paid the state tax dollar for dollar. Federal tax reforms enacted in 2001 phased out the federal tax credit, which placed the burden of state estate taxes back on individual estates. In response, a majority of states repealed their estate taxes. Unlike most states, Minnesota lawmakers chose to retain the state estate tax and chose to increase Minnesota’s already high estate tax burden. Minnesota also failed to follow the recent federal reforms to the federal estate and gift tax. As a result, Minnesotans can expect higher tax filing complexity (and higher compliance costs), less investment, lower economic growth, fewer jobs, fewer families who pass on entreprenurial enterprises, more people leaving or avoiding moving to the state, and less income tax revenue and possibly less revenue overall.