If you are a millionaire in New York, you have an incentive to stay alive and move! Some millionaires will have their estates taxed at a rate of 164% on portions of their estate. It was meant to reduce the tax rate and for some, it does. It’s not as bad as it sounds. They’re caught in a donut hole. Hopefully, they will fix it. The more tax law they write, the more this kind of thing will happen. It’s one of the reasons why we have tens of thousands of pages of tax law.
New York currently has the highest tax burden in the country at 12.6% of their per capita income.
This won’t help the migration we see out of the state.
“It’s nonsensical,” said Kevin Matz, an accountant and attorney in White Plains, N.Y. “The governor said this is about making New York a better climate for the wealthy. It’s had the opposite effect.”
On its face, the new law seems like tax relief. Under the previous law, New Yorkers paid estate taxes of 3.06 percent to 16 percent on the value of estates over $1 million. The new law raises that exclusion to $2.062 million this year and gradually increases it to more than $5 million by 2017.
But because the law also phases out certain credits related to federal taxes, people who have estates valued just above the $2 million threshold could get massive estate tax bills. An analysis by U.S. Trust found that a New York resident who dies today with a taxable estate of $2,165,625 could have to pay an estate tax of over $112,050. That represents a tax of over 100 percent on the value of the estate over $2,062,000.
It gets worse in a few years. Matz said that assuming that the exclusion rises to $5,250,000, a New Yorker with a taxable estate of $5,512,500 would have to pay an estate tax of $430,050. That’s a marginal tax rate of 164 percent on the value of the estate above the exclusion.
“It’s a bait and switch,” Matz said.
The solution, he said, is to not phase out the tax credits. Or, the state could also allow them to phase out over a much longer period of time.
The New York State Society of CPAs and other groups have sent letters to New York lawmakers in hopes of getting a quick fix. So far, there has been little response.
Source: Yahoo News