Yesterday, the Senate Finance Committee took action on SB 504 voting 13-2 in favor of a substitute that allows estates valued at $10 million or less to be excluded from state death tax collection. Senator Tommy Norment, patron of the original SB 504, voted against the substitute bill. He favors his original bill, as do we, calling for full repeal of the estate tax, not just repeal for a select few based on arbitrary amounts or those who set up their business the way the government says to.

Senator Emmett Hanger expressed concern about the new make up of the bill, and while he voted to report the bill he said he hoped the House of Delegates would "make it better."

Senator Walter Stosch also expressed concerns over the partial repeal bill, especially the "cliff" that was created to exempt some businesses. That cliff means that if a business is worth under a certain amount it owes no tax, but if it is worth one penny over the arbitrary amount being set by this new law, the tax is over $1 million. That is an expensive penny!

Many have concerns about the legislation but most important is that the senate pass legislation to the House that repeals the death tax, even if it is imperfect, so that the House can, in the words of Senator Hanger, make it better.

While action by the Senate Finance Committee to repeal the Death Tax is appreciated, partial repeal of the Death Tax based on valuation is good for Virginia or for family farmers and small business owners. Virginians for Death Tax Repeal opposes the amendments made to SB 504 for the following reasons:

Partial repeal would exhaust resources and capital from family farmers and small business owners as they hire attorneys to pursue tax avoidance policies and incur the cost of tax related insurance plans.

Partial repeal would encourage the wealthy to buy working farmland and allow their heirs to sell it for residential and commercial development.

Partial repeal would establish Virginia as the primary defendant of lawsuits regarding death taxes because exemption language departs radically from the federal calculation.

Partial repeal would drain state regulatory and enforcement resources.

Partial repeal would encourage tax flight by those with means seeking shelter in states without a death tax.

Tax flight carries a greater consequence with impact on income tax revenue, capital investment, charitable giving and volunteerism.

Partial repeal with a $10 million cliff means that growing businesses will suddenly be vulnerable to this tax in the coming years as they grow.

Partial repeal clauses for "working farms" and "closely held businesses" are so narrowly drawn that not a single business in Virginia could be identified that would be affected according to the Department of Planning and Budget in 2004.

Governor Kaine promised to phase out the death tax and conform Virginia to federal law. Amendments made to SB 504 move us further away the WRONG way from the federal law.

Further, the Wills, Trusts and Estates Section of the Virginia Bar Association expressed concerns regarding partial repeal legislation. They stated that partial repeal is "unusual and perhaps arbitrary."

Remaining Death Tax Repeal Legislation

HB 40(Tata)
Support WITHOUT amendments
Currently in Senate Finance

SB 504 (Norment)
Oppose in current format
Support with amendments to conform with federal law
Currently on Senate Floor