Sunday, May 21, 2023
Taxing Wealthy Dynasties Seen Backfiring In States Like New York
The American Economic Journal: Economic Policy published a study in May that suggests estate taxes don’t pay off in every state. Enrico Moretti, an economics professor at the University of California, Berkeley, conducted research with Daniel Wilson of the Federal Reserve Bank of San Francisco.
The pair analyzed the behavior of hundreds of prominent billionaires starting in 2001 when the US made state-imposed estate taxes more costly. The study found that estate taxes do not pay off in states with above-average income-tax rates. However, in states with low or non-existent income taxes on the wealthy, there is virtually no downside to adopting the estate tax.
Looking at the state of New York, for example, the estate tax used to bring in more revenue than it lost. However, this ended in 2017 when the state’s top rate jumped to 10.9%.
“What we’re saying is you can either be progressive on income tax or be progressive on adopting an estate tax, but if you do both it’s going to backfire,” said Moretti.
For more information see Ben Steverman “Taxing Wealthy Dynasties Seen Backfiring in States like New York” Financial Advisor Online, May 3, 2023.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.