It has been repeated many times that nothing in life is certain except for death and taxes. Of the two, it could be argued that taxes are the more impactful, because the state continues to tax you after your death.
While the estate tax is often portrayed as a reality that only affects the wealthy, the fact is that it can have a profound effect on the state’s small businesses, making it difficult for business owners to pass family businesses down generation to generation.
While some political ideologies will argue that all taxes are unjust, the estate tax unfairly singles out family businesses by serving as a deterrent to further invest as well as placing an unfair economic burden on small businesses.
So, what exactly is an estate tax? Well, according to the IRS, it’s a tax on your right to transfer property or wealth upon your death. Specifically, it’s a tax on the total amount of your estate, after all your creditors are paid, but before your heirs can receive their inheritance.
In Rhode Island, the estate tax credit is adjusted annually by the percentage increase in the consumer price index. For those dying on or after Jan. 1, 2023, the credit amount is $80,395, exempting from taxation the first $1,733,264 of an estate. In other words, if you pass away in 2023, an estate valued at $1,733,264, or less, will not be subject to Rhode Island’s estate tax.
We have introduced legislation (2023-S 0526, 2023-H 5802) that would phase in an annual increase of that exemption over an eight-year period until the state exemption equals the federal exemption. The reason why this is good policy for Rhode Island is because most states have been moving away from estate or inheritance taxes or have raised their exemption levels, because estate taxes hurt a state’s competitiveness. For example, Delaware repealed its estate tax in 2018 and New Jersey finished phasing out its estate tax at the same time.
It’s hard enough to do business in Rhode Island, we don’t need to increase that burden with an estate tax that discourages investment and drives high-net-worth business owners to other states. As long as Rhode Island clings to this tax, we should at the very least conform to the federal exemption levels.
We owe it to our small businesses. We owe it to those who have held on to those businesses for generations and worked hard. And we owe it to our children to make sure the legacy we are leaving them is not one that comes with a price tag that makes holding onto that business impossible.
State Sen. David P. Tikoian
and state Rep. Gregory Costantino
Tikoian (Democrat, District 22, Smithfield, North Providence, Lincoln) resides in Smithfield and Costantino (Democrat, District 44, Lincoln Smithfield, Johnston), resides in Lincoln.
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(1) comment
100% agree on this point!!!
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