House members vote to cut estate tax

AUGUSTA – Ignoring a price tag of $26 million, the House voted 83-57 on Wednesday to conform Maine’s estate tax law to federal estate tax provisions as of Jan. 1 of this year.

“We need to be competitive,” said Rep. Gary Knight, R-Livermore Falls. “We are losing people every year that move to other states to avoid paying the high estate taxes we have in this state.”

A retired banker, Knight told House members there are studies estimating 400 Mainers are moving to other states every year to avoid Maine’s estate tax. He said other states are moving to “re-couple” their estate tax to the federal law to stay competitive and avoid the loss of seniors who do not want their estates to pay the higher taxes Maine has by not tying its law to federal provisions.

Rep. John Piotti, D-Unity, the House chairman of the Legislature’s Taxation Committee, supported the bill while acknowledging it will likely fail to become law because of its price tag.

“This bill will not be passed into law, not with a $26 million fiscal note,” he said. “I want to talk about the policy behind the state tax.”

Piotti said that since the U.S. government cut the estate tax dramatically, many states, including Maine, did not continue to base their tax on the federal law. He said that has led to many Mainers leaving the state to avoid having two different tax laws apply to their estates and the additional administrative costs that causes.

“If I had my way, I would fix the federal system, but we don’t have that power here,” he said.

Rep. Jeremy Fischer, D-Presque Isle, blasted the measure as irresponsible. He said the legislation is not only unaffordable, it is bad policy.

“This is a $26 million tax cut to people that have estates over $1 million; that’s what this vote is all about,” he said. “I hope constituents will call and ask what is wrong with you people in Augusta.”

Fischer said lawmakers passed a budget bill a few weeks ago that made up for a loss of $190 million in revenue by cutting a wide array of programs that help the most vulnerable and poor in the state. He said to pass a bill that can’t be funded and makes no sense is wrong.

Rep. Mark Samson, D-Auburn, said the state needs to address the tax policy question, even if there is no money to pay for a “fix” of the system this year. He said the issue has become personal to him.

“My father, my father-in-law and my uncle are all moving out of the state,” he said. “We have no way to measure what loss that is to our state. There is a big list of celebrities with lots of money that have left this state so they can leave some money to their kids.”

Samson said there has not been a way developed to estimate how much revenue the state is losing every year as some of its wealthiest and most productive residents leave.

Others argued that worrying about the $26 million loss in the current budget is shortsighted, and that lawmakers should look at the long-term savings of keeping wealthy individuals in the state who can help its economy grow.

Rep. Timothy Carter, D-Bethel, argued the measure needs to be addressed as part of an overhaul of state tax laws. He said a tax-reform package that was defeated last year addressed the estate tax issue as part of a plan that raised some taxes to lower others.

“It can’t stand by itself,” he said of the bill passed Wednesday. “By itself, it is worthless. And we killed what would have worked.”