If Oregon voters are unwilling to eliminate the estate tax, the next best thing would be to reduce it.
That’s what Bend’s Republican state Sen. Tim Knopp is seeking with Senate Bill 671, which would align state law with federal law by exempting estates worth less than $5 million. Oregon’s current limit is $1 million.
Statewide, voters in November rejected Measure 84, which would have phased out the Oregon estate tax over three years. (In contrast, 55 percent of Deschutes County voters said yes.) Opponents of the measure cited the loss in revenue, which was estimated to climb to $120 million per year once the measure was fully implemented. That’s the best argument, but it’s not a sufficient one.
The estate tax amounts to double taxation because the assets have already been taxed and are taxed again when the owner dies. That’s simply unfair.
Worse, it’s bad for economic development, which affects everybody. Experience in the 30-plus states that have eliminated or reduced the tax suggests the change would create jobs by encouraging small businesses and others to save and invest. It also would discourage taxpayers from leaving the state and increase in-migration that brings investment and tax revenues. Measure 84 supporters estimated the resulting gains would more than offset losses.
Many affected by the estate tax are those with small family businesses, which are discouraged from investing and creating more jobs because of the uncertainty created by the tax. Although farms and forests are eligible for a $7.5 million exemption, that’s often less than the total value of the business and its hard assets.
SB 671 would phase in the change. The state’s exemption would increase to $2 million in 2014, $3 million in 2015, $4 million in 2016 and $5 million in 2017 and thereafter. Knopp estimates the cost at $10 million to $20 million per year, but that must be balanced against anticipated economic development that would likely more than compensate state coffers.
Knopp campaigned on this issue, and he knows it’s not an easy sell in a Legislature dominated by Democrats. But he believes there are a few Democrats willing to consider raising the limit, and he knows negotiation is the ticket.
Oregon’s estate tax is the enemy of fairness and economic development. This is a battle worth fighting.