In an overture to Tennessee conservatives, Republican Gov. Bill Haslam announced on Wednesday that he would prioritize reductions in the state’s death tax, but stopped short of committing to the abolition sought by a number of organizations and state representatives.
“There’s a whole lot of people who used to live in Tennessee who don’t anymore because it’s cheaper to die in Florida,” Haslam said. “I can tell you a whole lot of people who spend less than half their year in Tennessee to avoid that estate tax specifically.”
Though the promise is a step towards the state GOP’s longtime goal of abolishing Tennessee’s death tax, it still signals hesitation by the governor, and elicited a quick reaction from activists and trade groups opposed to the tax.
A powerful coalition of trade groups and taxpayer advocates were quick to release a statement entitled “Tennessee is still at a disadvantage.” (RELATED: Anti-death-tax advocates eye victory in Tennessee)
“Even with an increased exemption Tennessee will still be at a competitive disadvantage to states like Florida that do not have death taxes,” read the Wednesday statement issued by the American Family Business Institute, Americans for Tax Reform, Americans for Prosperity, National Taxpayers Union and the Beacon Center of Tennessee.
“While we applaud the governor for taking a step in the right direction to make estate tax reform a priority,” the statement continued, “we urge him and the legislature to completely repeal the tax rather than raise the exemption.”
In December, Haslam expressed concerns that Tennessee’s budget problems have left it unprepared to take on inheritance tax cuts, the Tennessean newspaper reported. His concerns did not appear to be shared by the Republican-majority General Assembly, which made clear then that it intends to move ahead.
In a joint-issued open letter to the governor in December, the anti-death tax coalition cited a study by economics guru Arthur Laffer, writing, “The robust economic growth resulting from elimination of the state’s inheritance tax would have added at least $7 billion to state coffers over the last ten years. The tax currently accounts for less than 1 percent of total state revenues.”
“Looks like he heard us, but we’re not quite there yet,” Charles Chamberlayne, communication director at the American Family Business Institute wrote The Daily Caller. “So we’re going to say it again.”
When the taxpayer dies, the death tax confiscates a percentage of their holdings, even though those earnings were already taxed when first earned. The tax has become a favorite villain for supply-side economists, who maintain that by taxing people large amounts of money for saving, rather than spending, the government is double-taxing, creating disincentives for responsibility and destroying family businesses that cannot protect their assets from death like their big-business competition does. Liberals touts the tax as an important source of government revenue and a blockade against the development of an American ruling class.
Applying to estates worth more than $1 million, in 2010, Tennessee used the tax to collect approximately $107 million, the Tennessean reported.
Despite backpedaling by the governor, the coalition remains optimistic that Republicans will ultimately continue with full repeal of the death tax.
“A recent poll showed the 84% of Tennessee business owners favor getting rid of their state death tax,” Palmer Schoening, director of federal affairs at the American Family Business Institute, told TheDC. “House Speaker Beth Harwell and Lt. Governor Ron Ramsey are both committed to work towards full repeal of the death tax in Tennessee and we’re still confident that the legislature can craft the right language to completely phase out the death tax in a palatable way, rather than just increase the exemption.”