New York - Guv seeks estate tax cut

New York - Guv seeks estate tax cut

BY TAMI LUHBY
STAFF WRITER - Newsday.com

Gov. George Pataki's proposal to eliminate the state's estate tax could save some New Yorkers thousands, if not hundreds of thousands, of dollars. But it would also cost the state hundreds of millions of dollars.

In the budget unveiled yesterday, Pataki proposed doubling the amount free from the state's estate tax to $2 million starting in 2007, bringing the exemption in line with federal rules. The exemption would rise to $3.5 million in 2009, and the tax would be eliminated in 2010. While federal law calls for the federal estate tax to be restored in 2011 with a $1 million exemption, New York's tax would disappear permanently.

It could be difficult, however, to get the plan through the state Legislature, where Democrats are looking at it with a critical eye. The state estate tax is expected to bring in $868 million during the fiscal year ending March 31.

Supporters of the proposal say that more New Yorkers will remain in the state - and support the economy here - if the tax is eliminated.

"It's ridiculous that so many New Yorkers are leaving for Florida to escape the estate tax," said Mark Hansen, spokesman for Senate Majority Leader Joseph Bruno (R-Brunswick).

Others, however, said any tax cuts should benefit more residents. Estate taxes disproportionately affect the wealthy, said Assembly Speaker Sheldon Silver (D-Manhattan). While he said he did not take a stand on repeal, Silver noted that the governor reneged on an agreement to restore the sales tax exemption for clothing costing $110 or less, which benefits many people.

This year, fewer than 4,000 estates will be subject to the state's estate tax, according to current estimates. The number dropped dramatically after 2000, when around 20,000 estates paid the tax, because New York overhauled its estate tax computations and raised the exemption amount. The state now has a $1 million exemption and bases its estate tax on federal tables, said Scott Ditman, a tax partner specializing in estate planning with Berdon, an accounting firm with offices in Jericho and Manhattan.

Eliminating the state estate tax could mean big bucks for heirs, said Steven Eller, a certified public accountant with Rosen Seymour Shapss Martin & Co. in Manhattan. For instance, estates of $1.5 million could avoid a tax levy of $64,400 and those worth $5 million would save $391,600.

"It would be a tremendous savings for New Yorkers," Eller said.

Revenue generator

More than 3,000 estates were subject to New York's estate tax in the last fiscal year, filling state coffers by nearly $900 million.

Fiscal year* Total estates Tax receipts (in millions)

2000 18,205 $975

2001 12,505 $717

2002 6,242 $761

2003 4,498 $701

2004 3,225 $732

2005 3,712 $895

2006 3,956 $868

*Fiscal years end of March 31.

SOURCE: New York State Budget
Copyright 2006 Newsday Inc.