This session, the General Assembly will consider legislation to chart its own course on the “death tax.”
The U.S. House tax bill proposes eliminating the federal estate tax entirely by 2024 – and the Senate plan raises the existing threshold, so that no one pays estate tax on the first $11 million of inheritance.
Maryland generally couples its tax rules with federal policy, and specifically made its estate tax conform more closely with the federal estate tax in 2014. Under current law, no one pays federal estate tax on the first $5.5 million of inheritance (ensuring this tax already only affects significantly large estates). Chapter 612 of 2014 made Maryland’s estate tax collection mirror the federal government’s over time. Estates worth $3 million or less pay no Maryland estate tax in calendar 2017; $4 million or less pay no Maryland estate tax in calendar 2018, and, beginning on January 1, 2019, the State exclusion equals the federal exclusion (again, pretty high already, at $5.49 million and indexed to inflation.)
Analysts estimate that the estate tax will bolster the State’s general fund with approximately $132.1 million in fiscal 2018.
Last session, Delegate Jimmy Tarlau introduced legislation to decouple Maryland’s estate tax collection process from the federal government’s. He plans to do so again this year, regardless of where Congress eventually lands on federal tax reform. His legislation would exempt the first $4 million from the Maryland estate tax, taxing estates after that threshold – providing more state general funds for public services. On his Facebook page, Delegate Tarlau indicates that the change would only impact 60 families in Maryland.
The Washington Post reports:
Under current law, Maryland — which has more millionaires per capita than any other state — is supposed to follow federal estate-tax rules beginning in 2019. The state now taxes inheritances greater than $4 million.
Tarlau estimates that raising the exemption level to $11 million could cost Maryland $50 million to $100 million a year. “We need to protect our money for programs like schools, roads, mass transit and tax relief for seniors,” he said.