Attorneys who handle estate planning for wealthy Connecticut residents told lawmakers Friday that Connecticut’s estate and gift taxes are driving out the very people the state needs in these difficult times.

Lawmakers on the finance, revenue and bonding committee held a public hearing on proposals to reform Connecticut’s estate tax and possibly eliminate the gift tax.

Supporters of estate tax reform believe the ongoing tax revenue from keeping wealthy residents in Connecticut would outweigh the lost revenue from the estate tax. Opponents of the proposal don’t believe people leave Connecticut because of taxes.

Joseph Pankowski Jr., law partner with the Stamford-based firm Wofsey, Rosen, Kweskin & Kuriansky, said that Connecticut’s “trickle” of wealthy people relocating to New York will become a “deluge” if the estate tax exemption is not raised to match both the New York and federal exemption.

New York is raising its estate tax exemption to meet the federal standard by 2019. Pankowski warned that Connecticut will start lose more high income residents to New York because they can avoid Connecticut’s estate tax and still see grandchildren who remain in Connecticut.

The committee was considering several bills dealing with Connecticut’s estate and gift taxes. Sen. Martin Looney, D-New Haven, introduced a bill to raise Connecticut’s estate tax threshold to match the federal standard, while Sen. L. Scott Frantz, R-Greenwich, has proposed bills eliminating the estate and gift taxes altogether.

Pankowski began his public hearing testimony by assuring the committee that he was politically left-leaning and supported numerous Democratic and Progressive issues.

However, he said that when Connecticut’s wealthier citizens leave for other states they take all their money with them, including any revenue that would be paid to the state in income and sales taxes, as well as philanthropic donations.

“For more than 25 years I have watched clients change their domicile to Florida to avoid the Connecticut estate tax,” Pankowski said. “Connecticut, of course, is the big loser whenever this has happened.”

Likewise, Kelly Galica Peck of Cummings & Lockwood in West Hartford, warned that wealthier residents will “vote with their feet” and that she regularly deals with the loss of clients to other states to avoid Connecticut’s estate and gift taxes.

Peck argued that Connecticut should eliminate the gift tax and reform the estate tax.

“Connecticut has the ignominious distinction of being the only state in the nation with a gift tax,” Peck told the committee. “Most states over the past decade have eliminated their estate and gift tax because they have determined ultimately that it is bad fiscal policy.”

The estate tax and gift tax bills also drew testimony from the Connecticut Business & Industry Association because the taxes apply to business owners as well. The estate tax can make it difficult for even small business owners and farmers to pass on the business to their children.

But not everybody was enamored with the idea of raising the estate tax exemption. Derek Thomas, a fiscal policy fellow with Connecticut’s Voices for Children, denied that there was an outmigration trend in Connecticut and worried that revenue lost from the estate tax would hurt state services.

Data from the Internal Revenue Service and U.S. Census Bureau, however, show otherwise. According to the IRS, Connecticut lost 27,541 people and $3.8 billion in adjusted gross income from 2011 to 2013.

Similarly, the Census Bureau found that Connecticut has seen a net decline in population for three years in a row.

As a compromise, Thomas offered the idea of off-setting the loss of estate tax revenue with an increase in other taxes such as the income or capital gains tax on top earners.

Thomas claimed the revenue loss from raising the estate tax exemption would be $74 million.

The average revenue from the estate tax is $147 million, according to figures provided by the Office of Policy and Management, which averaged out revenue from the estate and gift taxes between the years 2006 and 2015.

The change in average revenue would be $28 million lower if the estate tax exemption were raised to match the federal level.

The gift tax during that time period fluctuated between $8.5 and $218.4 million and averaged $41 million.

But the loss of revenue may pale in comparison to the loss of businesses and families that pay state income and sales taxes, along with their philanthropic donations.

Yankee Institute President Carol Platt Liebau pointed out that the revenue from the estate and gift taxes is “highly volatile” and has contributed to CNBC labelling Connecticut “the most expensive place to die.”

“This is not a designation we can accept with pride,” Liebau told the committee. “You can make our state a place where people are sure that the money they worked for, earned and saved is left to the people they love most, or to the charities they choose.”

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