COMMENTARY: Delaware estate tax ‘last chance’ at economic fairness

On May 18, the Delaware House of Representatives voted to end Delaware’s estate tax as of Dec. 31, 2017. The bill, HB 16, has been assigned to the Delaware Senate Finance Committee for review. It is likely to eventually be voted on by the full State Senate.

The estate tax impacts only the wealthiest among us, the heirs to large estates. Nationally, about two estates out of 1,000 are impacted by the estate tax, and the heirs owe, on average, 17 percent of the estate’s value.

For those unfamiliar with the estate tax, it is important to understand that the first $5.49 million of an estate left by a single person is exempt from taxes altogether, and for a married couple, that figure rises to $10.98 million. Only amounts over these thresholds are subject to the estate tax.

In the face of Delaware’s $385 million budget shortfall, the average citizen is hearing once again the call for “shared sacrifice.” For example, proposed cuts include reductions in a prescription assistance program for needy seniors ($2.5 million), in Temporary Assistance to Needy Families ($1.4 million), and in Medicaid dental reimbursements ($2.6 million).

In 2016, the estate tax yielded $9.3 million in revenue. Every year, the amount collected for the estate tax fluctuates because it depends on the death of a very wealthy individual, and no one can predict when a large estate will be left for heirs.

Some argue that the variable nature of the tax means we should eliminate it. Volatility is a poor reason to eliminate a tax when total state revenue is already inadequate and lawmakers intend to cut more than that amount in programs for the poor and disenfranchised. This would be a clear transfer of tax burden from the wealthiest to the poorest, who won’t be able to replace the services they lose.

The huge wealth gap in the U.S. and Delaware is due in large part to taxation policies that benefit the wealthy throughout their lifetimes. For example, the taxes on wages are much higher than the taxes on capital gains, where most of their wealth is generated.

The estate tax is the last chance at fairness towards taxing the wealthy.

Delaware should be focused on creating revenue rather than reducing it. The state budget has never fully recovered from the economic collapse in 2008.

Since then, the state budget has been subject to severe cuts and held to growth levels at or below the Consumer Price Index. In effect, we never climbed out of the hole created by the recession.

In the midst of so much austerity, it is difficult to think of a worse example the legislature could set than zeroing out the estate tax for our wealthiest citizens. The estate tax touches only those who are most able to afford it. The State Senate should vote “No” on HB 16.

EDITOR’S NOTE: Tim Barchak, of Newark, is a spokesman for the Economic Justice Initiative of the Wilmington-based Pacem In Terris, a nonprofit organization that strives for “positive peaceful change on the local, national and global level. “