The Empire Center for New York State Policy supports Gov. Andrew Cuomo’s proposed expansion of the estate tax exemption as a significant first step toward reducing the burden it creates for New Yorkers, but stressed the need for an eventual repeal of the estate tax altogether.

At a press conference in Albany Monday, the Empire Center, a conservative think tank, released a report titled “New York’s Death Tax: The Case for Killing It,” in support of a repeal of the state estate tax, citing three main reasons: the estate tax affects farmers and small business owners, not just the wealthiest New Yorkers; if people want to avoid the tax, they can move to many other states that don’t have similar taxes; but those who are worth just above the exemption threshold for the estate tax are often rooted in New York and cannot move away to avoid the penalty.

“For decades there have been debates on the national level over the appropriateness of having an estate tax; whether they were morally justified or not justified; whether they hurt the economy or not,” said E.J. McMahon, president of the Empire Center. “Basically the nation arrived at a political consensus and compromise on this issue.”

According to the report, New York is 1 of 14 states with an estate tax. The current state estate tax applies to assets starting at $1 million, with no breaks for spouses. In 2013 only two states had a lower exemption threshold: New Jersey at $675,000; and Rhode Island at $910,725.

Cuomo’s proposed budget this year includes a reform of the estate tax meant to phase in over five years, to both raise the exemption threshold to the national level of $5.34 million and lower the top tax rate to 10 percent from 16 percent. According to the report, these measures will reduce the number of estate tax filings by 90 percent.

McMahon said the stigma attached to estate tax reform is based in the misuse of the word “millionaire,” which he said refers to those owning assets of at least $1 million – such as farmers, small business owners and those whose property values have increased over the years – as opposed to those receiving incomes starting at $1 million.

“New York’s estate tax doesn’t apply to the vilified top ‘1 percent.’ It hits individuals and families who have worked hard and saved their money,” McMahon said. “The tax stymies economic growth and puts New York on an uneven playing field.”

McMahon was accompanied by Jeff Williams, director of public policy for the New York Farm Bureau, and Mike Durant, New York state director for the National Federation of Independent Business.

The Farm Bureau is a volunteer organization which works to remedy economic and public policy barriers for farmers.

“The phrase ‘land rich and cash poor’ epitomizes farmers in New York state,” Williams said. “When you look at the average size of a dairy farm, for example; 125 cows; associated crop land; structures on a farm needed to produce crops and milk; those reach $1 million very, very easily in today’s economy.”

Williams said more than 3,000 farms in New York are estimated to be valued at $1 million.

“So many small businesses are multi-generational, not only the business ownership itself gets passed on to kids, but they also employee multi-generational families,” Durant said. NFIB is a small business advocacy group. “Without reforming the estate tax it becomes increasingly difficult for the business owner to then pass that business on to their children, for that business to be sustained with in that community. I think we could all get in our vehicles and drive across New York, particularly upstate, and see the enormous amount of vacant commercial property. I think the estate tax is a chief culprit of that.”

© 2014 Legislative Gazette