The federal government gave wealthy Californians — particularly homeowners — a helping hand in 2017 when it slashed the estate tax.
Now, the California legislature is set to consider raising a state-level estate tax, essentially making up the difference from the savings under the federal tax, according to the Los Angeles Times.
The 2017 federal tax overhaul raised the minimum estate value to qualify for the tax from $3.5 million to $11.4 million for individuals, and $22.8 million for a married couple, meaning far fewer people had to pay.
But California’s SB 378 would lower the estate tax to $3.5 million, capping it at the federal threshold. It wouldn’t apply to estate valued above the federal threshold, in order to avoid double taxation, the Times reported.
For high-net worth Californians, the tax might be another reason to leave the state. Some wealthy people are fleeing high-tax states like California and New York because the 2017 tax overhaul also capped the federal deductions allowed on state and local taxes.
The cap puts 11 million people on the hook for $323 billion in taxes they could write off before the 2017 overhaul.
Florida is a popular destination, because there’s no estate tax. The influx of wealthy people has also buoyed a slowing condo market in Miami.
SB378’s authors say it could raise as much as $1 billion per year. The state wants to earmark it for programs designed to fight income inequality, including a program that would create savings accounts for children from low-income families. [LAT] — Dennis Lynch