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Publication Date: August 2007
Publisher: Center on Budget and Policy Priorities (Washington, D.C.)
Author(s): Elizabeth C. McNichol
Research Area: Banking and finance; Economics
Keywords: Economic projections; Tax code; State budgets
Type: Report
Abstract:
Taxes on inherited wealth are a traditional and common revenue source for states. Prior to the passage of the federal estate tax cut in 2001, every state levied an estate tax that allowed them to “pick-up†a share of federal estate tax revenues. The state “pick-up†estate taxes did not increase total estate tax liability for estates, because estates received a dollar-for-dollar credit that reduced federal taxes owed by the amount they paid to the state. As part of the 2001 federal legislation, the federal estate tax credit to which most state estate taxes were tied was repealed. Despite this, a number of states retained the revenue that these taxes generated by “decoupling†from the federal tax code.