Both Democrats and Republicans were quick to champion the idea of eliminating the estate tax after the Providence Journal reported that former Rhode Island Governor Lincoln Chafee was moving to Wyoming. Representative Stephen Ucci (Democrat, District 42, Johnston) pounced on the story to tweet:
“Name a state with plenty of horses and no estate tax?” This is why we need to eliminate the estate tax completely. We’re losing wealthy philanthropic Rhode Islanders. #killthedeathtax https://t.co/pFWmwK9QEU— Stephen Ucci (@stephen_ucci) January 29, 2019
Chafee, in the Providence Journal piece, never mentions the estate tax as a reason for moving. Instead he talks about the wildlife and about returning to a state where he had worked as a blacksmith in his early years.
Ucci wasn’t alone in assuming, without evidence, that Rhode Island’s estate tax was the reason for Chafee’s move. Rhode Island Republican Party Chair Brandon Bell issued a press release that read, in part, “We need to keep Chafee and other wealthy, charitable individuals in Rhode Island. But we can only do this by lowering our taxes. This begins by eliminating Rhode Island’s estate tax.”
I emailed Chafee and asked him about this. Chafee responded by saying, “…there were many factors in making this decision. Have you had a chance to visit this area? Really spectacular.”
I asked if the estate tax was one of those “many factors.” Chafee did not respond.
Addressing the 2019 Rhode Island Small Business Economic Summit, Speaker Nicholas Mattiello (Democrat, District 15, Cranston) spoke about his perception that the estate tax needed to be eliminated.
“…I have not talked to an estate planner or an accountant, that has not told me that our productive citizens are leaving the State of Rhode Island,” said the Speaker. “…we’re not doing everything we can to keep our successful folks here.”
“Now unfortunately, that one becomes a little bit political,” continued the Speaker. “Ideology kind of rears its’ ugly head in that particular issue. And I’m not sure why but why wouldn’t we want our successful people to stay here to continue to pay taxes here, to continue to invest, continue to donate? So that’s going to be one that we at least have a conversation about and hopefully we can do something and move to make Rhode Island a little bit more competitive.” [emphasis mine]
Note that Mattiello doesn’t call the people who may pay an estate tax when they die wealthy or rich. He calls them “productive citizens,” “successful folks” and “successful people.”
Mattiello uses the words “Productive” and “Successful” to draw a distinction between the wealthy and the vast majority of us who are unproductive and unsuccessful because we won’t leave behind estates worth more than $1.5 million dollars when we die. And “when we die” is important because the person who pays the estate tax, contrary to everything you may hear, is dead. Dead people who are somehow productive and successful.
Only 17 states have estate taxes, including Rhode Island, Massachusetts, Connecticut, Vermont and Maine. To pay estate taxes, you have to satisfy two conditions: (1) You have to have an estate worth in excess of $1.5 million, and (2) You have to be dead. You will never pay any estate taxes in your lifetime.
This means that most people will never pay an estate tax. In Rhode Island, the first $1.5 million dollars of an estate isn’t taxed at all. This wasn’t always the case. In 2014 the General Assembly slashed the estate tax by raising the estate tax threshold from $921,655 to $1.5 million. At the same time, the estate tax was changed. Prior to 2014, being even one dollar over the threshold meant that the entire estate was taxable. Now Rhode Island taxes only the money in excess of $1.5 million.
[Let me note here that I’m using the $1.5 million as a static number, when in fact this number increases every year. In 2017, the General Assembly changed the estate tax so that the exception started to be adjusted for inflation. In 2018 the exception was $1,537,656. If the estate was worth $1,537,657, Rhode Island would only apply taxes to a single dollar.]
Interestingly, the Representative who lead the charge on estate tax reform in 2014 was Deborah Ruggiero (Democrat, District 74, Jamestown), one of the members of the “progressive” Reform Caucus that challenged the leadership and power of the Speaker early in the 2019 session. Just another reminder that Democrats and Republicans are equally liable to champion tax breaks for the rich, even if the rich in question are dead.
Since reforming the estate tax laws in 2014 and 2017, Rhode Island has foregone $103.2 million in revenue. A total of 2,304 dead people paid the estate tax, an average of 576 people a year.
[The economic data I’m using in this piece are from the Economic Progress Institute, but the opinions expressed here are all mine.]
Reducing taxes on the rich is a non-partisan issue, but it makes for good theater sometimes. For instance, when Trump pushed through his signature federal tax cuts, which benefited the rich to the detriment of the middle class and the poor, Rhode Island Governor Gina Raimondo, a Democrat, issued a statement that read, in part, “The Republican-Trump Tax Bill is an unconscionable handout to millionaires and billionaires paid for by working families from cities and towns like Cranston, Warwick, Providence and every other part of Rhode Island.”
This did not stop Raimondo from replicating key provisions from Trump’s tax cuts in her most recent budget proposal. When I asked the Governor’s office about this apparent contradiction, I was told by Brenna McCabe, at the Rhode Island Department of Administration that, “This is not a partisan issue.”
[As a side note, Representative Ucci, who issued the tweet near the top of this piece, also works for the law firm of Adler, Pollock and Sheehan, which threw Raimondo an expensive fundraising breakfast Friday morning. Ucci was one of the hosts for the fundraiser.]
Tax cuts for the rich are a non-partisan issue because neither party cares about the poor and the middle class: They only answer to those with money. And those with money want only one thing: More money. Even if they’re dead, apparently.
“It is time for State House politicians, like House Speaker Nicholas Mattiello, to stop talking about reducing the estate tax, and actually get rid of it,” wrote RI GOP Chair Bell in his press release. “Make this the year Rhode Island eliminates its death tax. Let’s Keep Chafee in Rhode Island.”
Uh, yeah. That’s not why Chafee left.
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