When someone from Oregon dies, the state imposes a one-time tax on their estate, if that estate is worth $1 million or more. Measure 84 would phase out Oregon’s estate tax. OPB’s Kristian Foden-Vencil reports on what effect such a tax cut might have.
Tucked in the rolling hills just west of Salem are the 234 acres that make up Gerald Freeman’s farm.
“I was born in this house, in that bedroom right behind you in 1936,” Freeman says.
Behind the house, at the top of the hill that dictates the shape of Freeman’s land, stands a small quarry.
“This is a rock pit and I opened it in 1978,” Freeman says. “And the county had been up here with a crusher in the 1930s and had crushed rock out of here.”
The rock is used for roads.
So at the top of the hill Freeman has a quarry; on the upper flanks of the hill he has Christmas trees; the lower flanks have cherries and at the bottom are wheat fields.
“You need to be diversified,” Freeman says. “If one product goes down the other goes up. There’s no rhyme nor reason. We tried to predict wheat usage in my younger years and never ever figured it out.”
Some have said farming is a lot like professional gambling — but Freeman says the odds are even worse.
Freeman says he hasn’t had his property assessed to see how much it’s worth. But he says the difficulties of the farming business, and that long struggle to stay on the land, are among the reasons he believes the estate tax should be phased out.
“It would be possible that you could lose your farm and your legacy at the same time with not being able to pay these taxes. And it’s a double tax.”
What does he mean by double tax?
“Well you pay taxes on everything, the improvements and everything that you’ve done on your property. And then the government comes in when you die and meets you with the undertaker and wants another piece.”
Freeman believes the owner of any business, not just farms, should be able to pass that business onto his or her heirs without an estate tax. Anti-tax activist Kevin Mannix, who now heads Common Sense for Oregon, agrees.
“The businesses which are hurt the most are smaller businesses,” says Mannix. “The ones that are started from scratch have a small number of employees, and they have a tremendous amount of their value invested in the building, their inventory, and they don’t necessarily have a lot of cash on hand.”
Measure 84 has been endorsed by various groups, from the Oregon Family Farm Association to Associated Oregon Industries.
Critics of the measure say that it’s a tax break for millionaires. And they say it won’t do much to help family farms. The group Our Oregon says some family-owned natural resource properties worth up to $7.5 million can already get a tax credit from the state to wipe out their estate tax liability.
Some business groups also oppose the measure. Oregon Business Association President Ryan Dekert says if Oregonians want to change Oregon’s tax structure, then all taxes should be on the table.
“Why come to the initiative to take something off when we have so much promise of actually getting things done comprehensively?” Dekert says. “And this one isn’t a comprehensive measure, it takes one piece of the puzzle.”
Richard Solloman is a Certified Public Accountant and a member of the group ‘Equity Alliance Oregon.’ He says the estate tax is broken and needs fixing. But he says Measure 84 is not the answer. He says a married couple can have an estate worth $2 million before Oregon’s estate tax kicks in.
“So you’re really talking about a fairly small number of people who ultimately pay Oregon estate taxes,” Sullivan says.
A phase-out of of the tax would reduce state revenues.
“We estimate that the impact of Measure 84 would reduce state tax revenue by $60 million in our upcoming 2013-15 biennium,” Paul Warner is with the Oregon Legislative Revenue Office says. “And when it’s fully phased in it would be $190 million in the 2015-17 biennium.”
To put that into perspective, the state pays about $190 million to educate about 29,000 students for a year.
Warner says there’s also a provision in the measure that would define an estate tax as a tax imposed on the transfer of property within families, regardless of whether there’s a death or not.
“There’s some speculation as to whether that could potentially affect capital gains income that would ordinarily under current law be taxed at the time of transaction,” Warner says. “So right now that revenue impact is uncertain, but it is a risk that would potentially increase the size of the revenue impact on the state’s general fund.”
Measure 84 will be on Oregon’s November ballot.