I don’t like that Melissa Daniels uses the Frank Luntz-coined pejorative “death tax” to refer to the inheritance tax in a straight news article. The term makes no sense. You’re not taxing the dead person, you’re taxing wealthy heirs.
Anyway, there’s a bill in Harrisburg with some bipartisan support that would exempt business assets from the state inheritance tax. If your mom and dad want to pass down the family business to you, you wouldn’t pay taxes on that. I’m open to persuasion that this is a decent idea, but like Margo Davidson, I’d be concerned about the revenue loss:
State Rep. Margo Davidson, D-Delaware, voted in favor of the exemption proposal, calling the inheritance tax on small businesses “subversive and burdensome” to families. But she voiced concerns about the piecemeal way that business tax reform seems to be evolving in Pennsylvania, at a time when “school district budgets are being slashed” and the state struggles to take care of vulnerable residents.
“I do believe that we really need to take a look at how we’re doing this tax reform,” she said, suggesting that lawmakers look at a package of tax reform bills simultaneously.
State Rep. Rick Mirabito, D-Lycoming, also supported the inheritance tax exemption. He suggested lawmakers find other places, such as the hotel occupancy tax, to make up the difference.
“We may have to consider some bills that raise other taxes,” Mirabito said.
Unlike Rick Mirabito, I don’t see the need to go looking for other taxes to replace this revenue. Just raise the inheritance tax rate to make up the difference, and then some.
The inheritance tax is a great tax. It doesn’t hurt the economy at all when we skim off a big chunk of the inheritance flowing to wealthy heirs. This is one of the least economically destructive ways we can raise revenue to fund public services, so it makes sense to raise as much money as we can from inheritance before we start thinking about taxing beneficial stuff like work and sales.