Every year, when the cherry blossoms bloom, we rejoice for the official end of winter and the beginning of spring. There’s only one day during this season every taxpaying resident dreads, and it is Tax Day. On April 17, federal and D.C. taxes are due and it’s important to prepare, seek consultation if necessary and file on time.
Earlier this week, one of my colleagues on the Council sent a letter to the other members and the press regarding a tax issue and a possible bill. Any legislation addressing District taxes would fall under the purview of the Committee on Finance and Revenue, of which I am chairperson. This letter addressed the complexities of the estate tax and how it should be changed in the District. The following are my thoughts on the matter.
The estate tax in the District has always been coupled to the federal estate tax, except in 2010. The 2014 Tax Revision Commission recommendations adopted by the Council recommended that D.C.’s estate tax be coupled with the federal estate tax. As such, the District’s estate tax exemption was raised to $5.6 million. With the increase of the federal estate tax exemption to $11 million, the District’s exemption is now also $11 million.
I recommend that D.C. remain coupled for the following reasons:
- Most states, 35 to be exact, do not have an estate tax. Only 15 still have one.
- Our main competitors, Virginia and Florida, are two of the 35 states that do not have an estate tax. Therefore, many D.C. residents re-domicile to homes in Virginia and Florida, depriving the District of their income tax.
- The estate tax is widely regarded as the most unfair of all taxes. The estate tax is essentially a double tax. All assets in one’s estate have already been taxed. To tax them again after death is a double tax. The very rich never pay estate tax, because they organize their finances in trusts and other tax avoidance plans.
- The estate tax largely falls on working-class people and small business owners. In both cases, many children are forced to sell their family home or their parents’ business in order to pay the estate tax.
- As our CFO has indicated, coupling with the federal tax code simplifies our D.C. taxes, making it easier on our residents.
For these and other reasons, I believe we should join the majority of the states and get rid of the estate tax completely. However, I am willing to compromise and remain coupled with the federal tax code and keep our exemption at $11 million. Surprisingly, the amount of money involved is $6 million, a relatively small amount to forego when compared to our $14.5-billion annual budget.
There are many serious issues facing the District in the coming years, but to be double taxed is something that our residents should not be worried about when a relative passes away.
Jack Evans is the District Council member for Ward 2, representing Georgetown and other neighborhoods since 1991.