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Cuomo embraces GOP idea of cutting estate tax

New York State Gov. Andrew Cuomo is shown

New York State Gov. Andrew Cuomo is shown before giving the State of the State address at the Empire State Plaza and Convention Center in Albany, NY. (Jan. 8, 2014) Credit: Newsday / J. Conrad Williams, Jr.

ALBANY -- Scaling back New York's estate tax has gone from a nonstarter for Democrats to a target for reform by Gov. Andrew M. Cuomo.

"Let's eliminate the 'move to die tax,' where people literally leave our state," Cuomo said in his State of the State speech this month.

Cuomo will detail what would be the first substantial scaling back of the tax Tuesday when he releases his executive budget proposal.

Currently, New York State applies the tax to all estates of $1 million or more. It taxes a family business owner, farmer or the owner of a $1 million property at a rate of up to 16 percent regardless of actual income. That means families with middle-class incomes and estates of that size are hit with a tax originally intended for the wealthy. Estates passed to spouses aren't subject to the tax.

Cuomo proposes to raise the threshold to the federal estate tax level of $5.25 million, and to lower the top tax rate to 10 percent. He won't provide the revenue cost until he releases his budget proposal Tuesday, but estimates put the state revenue loss in the hundreds of millions of dollars. Legislative estimates are that the change could cost the state $700 million over the next few years.

Supporters say the governor's little-noticed measure -- long supported by Republicans -- would go a long way toward curbing the exodus of small business operators and retirees to states with no inheritance taxes. Assembly Speaker Sheldon Silver (D-Manhattan) hasn't dismissed the proposal long opposed by members of his party.

"This is like the biggest of sore thumbs and it's become increasingly large," said E.J. McMahon, president of the Empire Center for Public Policy, a fiscally conservative Albany think tank.

"We are the only one of the big four states that are taxing it this way . . . the only way to escape it is move before death," he said.

Liberals see Cuomo's idea as a break for the rich, and coming at a time when the gulf between the rich and working poor has become an issue in New York.

The idea of cutting the estate tax has a long Republican pedigree, including efforts by President George W. Bush in 2001 to trim it at the federal level. Since then, most states have phased out or scaled back their estate taxes, leaving New York among just 15 states with the levy.

New York Senate Republicans have sought to ease the measure, arguing it is a burden for the middle class and for family businesses, particularly farmers. Former Republican Gov. George Pataki revived the idea of estate tax reform when he was co-chairman of Cuomo's tax commission last year.

"It only goes to millionaires and billionaires," said Michael Kink of the progressive Strong Economy for All Coalition of labor unions and community groups. "Million-dollar estates and $5 million estates are not something the vast majority of New Yorkers possess.

"We'd get more jobs and broader prosperity -- and less income inequality -- from bottom-up options like investments in schools, public services, clean energy and infrastructure," Kink said.

McMahon sees it differently.

"It's an essential first step to what needs to be done, which is totally eliminating it," he said of the estate tax.

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