Annapolis MD – Few people took notice outside of the hearing room, but the Maryland General Assembly Ways & Means Committee had a meeting this week on MD House bill 722 to help Qualified Family Owned Businesses with the estate tax. This was scheduled to gather input for the summer study requested by Chair Sheila Hixson during the 2013 legislative session. The bill is modeled after a similar provision that passed last year for farmers that raises the exemption amount and lowers the rate provided the farm stays in the family for at least ten years.
Delegate Kumar Barve chaired the hearing that lasted almost two hours on Tuesday October 22. Chair Sheila Hixson is reportedly out sick and unable to speak. The first panel of witnesses included Andrew Schaufele from the Comptroller’s office who reported on projected revenues and potential impacts of the bill and the current management of the estate tax in Maryland. Maryland is decoupled from the Federal estate tax since 2002.
According to Mr. Schaufele, the director of the Bureau of Revenue Estimates, there were approximately 1,700 estate tax filings in 2012 which are all processed by hand. Cailin Talbert, the acting manager of the estate tax for the Comptroller’s office was also present and confirmed that the estate tax returns are complicated and confirmed they are done by hand.
Additional panelists included senior fellow Diana Furchtgott-Roth from the Manhattan Institute. Ms. Furchtgott-Roth is an economist and former chief of staff to the White House council of economic advisors. Her statement indicated that Maryland is one of just two states that impose both an estate tax and inheritance tax. She made the case for full repeal of the estate tax which would spur economic activity and reduce the fleeing AGI that the Tax Foundation estimated is $5billion over the last ten years. Furchtgot-Roth went on to say “Maryland has seen an exodus of taxpayers to Virginia, West Virginia, Pennsylvania, and Delaware. Between 2000 and 2010, it lost $5.5 billion in AGI; almost $3 billion went to its four neighboring states.”
Jack Fitzgerald, entrepreneur auto dealer, and founder of Americans Standing for the Simplification of the Estate Tax (ASSET) also testified on the difficulties a private business faces in amassing capital. Using data from the last 20 years running his corporation he demonstrated to Delegate Afzali, Delegate Serafini and Delegate Barve that the lion’s share of what is left is paid out in salary, employee benefits and taxes. Mr. Fitzgerald has long advocated for an alternative collection method to the estate tax that does not require the “fire sale” of a business and potential job losses.
“We’ve been working on the federal level for several years now, and we think we have a creative solution that both sides can live with. The same could be done at the state level” said Fitzgerald to the lawmakers present.
Additional witnesses included three attorneys for trusts and estates and an attorney arguing against any change in the current estate tax. Lawmakers present made no commitments to further action on the bill but Delegate Afzali later said that these witnesses might consider testifying next year if the bill comes up again in the house. In the words of O’Malley – this writer recommends we move forward, not back.
Rob Smith – President, ASSET