Kiplinger has dubbed Oregon “the most frightening place in the U.S. to die if you’re concerned about estate taxes,” pointing to the state’s high estate tax rates, the tax’s low threshold and the failure of policymakers to raise the tax exemption or even index it for inflation.
House Bill 2624 would make the estate tax less traumatic for grieving families, less threatening to small businesses and less compelling as an incentive for successful people to leave Oregon, as OBI’s Scott Bruun explained to the House Committee on Revenue Feb. 9.
Oregon is frightening, in part, because it is outlier. Thirty-eight states sensibly don’t have estate taxes at all, and these include Oregon neighbors California, Idaho, Montana, Wyoming, Colorado and Montana. While Washington does have an estate tax, the threshold at which it kicks in is more than twice Oregon’s. Washington’s tax also adjusted periodically for inflation.
In Oregon, the estate tax kicks in at $1 million, and the balance is taxed in escalating fashion at rates ranging from 10% to 16%. This is onerous for families and for family businesses of every size. But it’s particularly harmful to small family businesses without liquid assets to pay those taxes. Such families may have to sell businesses or take on debt just to settle estates.
HB 2624 is reasonable and necessary step in the right direction. It would add $1 million to the exemption threshold and index it the threshold to inflation. If it passes, Oregon would still be among the small number of states with estate taxes. But it would no longer be the worst and most frightening. The state’s estate tax would be comparable to Washington’s, reducing a powerful incentive for tax-savvy Oregonians to move north for the benefit of their children. This capital flight deprives Oregon and Oregonians of expertise, income tax revenue, friends and neighbors.
Oregon’s frightening estate tax is one of many contributors to Oregon’s flagging competitiveness. For this reason, mitigating its harm is a key component of OBI’s Growth and Innovation Roadmap.
To read Scott Bruun’s full testimony, go here.