A study on Conn.'s Death Tax

Posted on March, 06 2017, 16:06

I have written before about the Nutmeg State's long-time romance with the Death Tax.  It was nine years ago last month when the Connecticut Department of Revenue Services issued a report to their Governor on the Connecticut estate tax.  The study showed that a majority of wealthier citizens leaving Connecticut did so because of the high Death Tax and that economic growth was less in Connecticut and in other states that still had their own estate taxes. 

At that time, the Democratic Governor of the state, in order to stimulate economic growth, to slow out-migration of wealthier citizens and to increase state revenues, proposed to repeal the state Death Tax.  Her Democratic state legislature, however, chose to further punish the state and its citizens by refusing the Governor's request.  They defeated repeal.

We now have an interesting study put out by the Yankee Institute for Public Policy, (http://www.yankeeinstitute.org/) a Connecticut-based free-market think tank which builds on the 2008 study citing some entrepreneur's personal stories.

According to the study, John Caracciolo decided several years ago to retire to the Connecticut countryside.  He reports that he willingly put up with the high state income tax, high cost of living and high property taxes.  But as he and his wife looked at their future, he says, "I worked my whole life to save for my family's welfare and their future and the state's going to take seven and a half percent of it?  No, I'm not going to deal with that, no way." 

A retired Goldman Sachs manager who is considering moving over to Rye, New York
named David tells the Yankee Institute, "Why does the state think that people with wealth are going to stay?"  He adds, "They are going to leave." 

The Connecticut levy also applies to estates worth far less than the $5.4 federal threshold -- it kicks in after just $2 million. 

Unfortunately, the Yankee Institute did not go into the real economic cost of forcing people with success and wealth to move to Florida or North Carolina (the two most popular states for Connecticut residents to move to) or even to New York.  They lose people who make major contributions to the state's production and its standard of living.  In other words, the dynamic ill-effects of the state Death Tax are far wider than simply penalizing the successful. 

Of course, Connecticut is one of just fifteen states (plus the District of Columbia) to have a Death tax.  And, if President Trump and the GOP are successful, the federal Death Tax will be repealed this year and when that happens, I predict another half-dozen states will repeal their estate or inheritance taxes within two years.  Connecticut will likely be one of the last holdouts.