Estate Taxes Help States But Are Easily Avoidable By Wealthy
Research by Enrico Moretti of the University of California, Berkeley, and Daniel J. Wilson of the Federal Reserve Bank of San Francisco found that estate taxes raised more money for states that had them than they lost in income-tax revenue when billionaires left, according to The New York Times. The estate tax in the United States is a tax on the transfer of a deceased individual's estate.
As wealthy individuals grow older, they become less likely to continue to live in states that charge estate taxes. From 2001-2017, a 40-year-old billionaire on the Forbes list had a 22 percent chance of living in a state with estate taxes, and the number decreased even more as age increased, falling to only 9 percent by age 90.
"If the rich can avoid taxes by moving to the lower-tax state or country next door, states and countries will race to cut taxes to poach one another’s wealthy. Such competition is the main reason European countries have all but abandoned wealth taxes," University of California, Berkeley, economist Gabriel Zucman said.
The typical estate tax is about 16 percent and yields more revenue than the income tax that states would have collected in the time it took for the billionaires to leave. For reference, if Jeff Bezos of Amazon died today at his home in the suburbs of Seattle, his estimated net worth of more than $100 billion would generate almost $12 billion in state taxes.
States are competing for wealthy individuals to live in their regions and the revenue for the taxation on these high net worth individuals is huge.