During this pandemic-recession and beyond, the people of our state need our government to provide public services for their wellbeing, economic security and good health. Our state should be insuring that all residents have safe and COVID-free housing, regardless of race, ethnicity, income, wealth, or poverty.
As low income and middle class Washingtonians already pay disproportionately for state taxes, we must develop new progressive revenues which are created through taxes on affluent residents and corporations of our state. One approach is to reform our state’s estate tax, a tax that solely falls on wealthy decedents. It makes sense to tax the wealth of those who have benefited the most from our current economy to provide a start for all Washingtonians for a secure economic future.
We face multiple barriers compared to earlier generations. The costs of housing, health care, child care, and higher education create severe economic insecurity. At the same time, the value of the estates of the wealthy has skyrocketed, while federal taxes on these estates have declined. The Trump tax cuts in 2017 excluded the first $11.58 million ($23.16 million for a couple) from any estate taxes. Further, the estate tax rate has been almost halved over the past five decades.
The state estate tax kicks in for estates valued in excess of $2,193,000. The estate tax rates begin at 10%, and top out at 20% for the value in estates in excess of $11,193,000. For example, an estate worth $5 million pays about $361,050 and one valued at $10 million pays $1.26 million in state estate taxes. Neither of these estates are subject to any federal estate taxes.
This reform to the estate tax will generate about $100 million annually in new revenue. The reform will:
- increase the allowable exemption for estates from $2.19 million to $2.5 million, eliminating the state estate tax on 25% of the estates currently taxed (approximately 100 estates annually);
- decrease the state estate tax for another 53% of estates (approximately 200 estates annually, those between $2.5 million and $6.5 million);
- increase tax rates on estates valued at
- $10 million by 1.33%,
- $25 million by 5.64%,
- $50 million by 7.8%, and
- Double the tax rate on estates valued in excess of $1 billion
In total, taxes would be increased on the 60 wealthiest multi-million dollar estates, annualized.
Because the estate tax is already in place, the increases and decreases in taxation would be effective this calendar year.
An Equity in Housing Fund
The accumulation of wealth has benefited affluent white households, to the detriment of Black and brown people. The median net worth of white households is 10 times that of Black families. Historical impacts of systemic housing discrimination perpetuate racial disparities in homelessness. Black people are overrepresented by three-fold among those experiencing homelessness. The COVID-19 pandemic disproportionately affects both the physical and financial health of Black families and families of color.
The discouraging nexus between the accumulation of wealth and the racial wealth gap is also addressed in this legislation through a new Equity in Housing Fund. 10% of estate tax revenues, approximately $35 million, will be dedicated to the Equity in Housing Fund to remedy homelessness, including foreclosure prevention, rental assistance, outreach engagement services, housing services and behavioral health with priority for agencies, programs and services which address current and historical racial inequities.
In total, the estate tax reform will, by itself, generate an additional $100 million annually for investments in both education and housing security for Washingtonians.
More To Read
October 20, 2023
Many Washington counties don't have a single resident who would pay a wealth tax - but they would benefit
September 12, 2023
Except billionaires. And even they lose.
August 24, 2023
Multiple states are also fighting to tax the ultra-wealthy. Why now?