The voices of Tax Policy Center's researchers and staff

Given the season, it is not unreasonable to ask: Why is this state different from all other states?

People often want to know if we have state estimates to correspond to our national estimates of particular policies. The answer is always no, and that is what I told someone who asked how many farms and small businesses would owe estate tax in his state under President Obama's proposal. However, I found a very nice table on the IRS website showing number of estate taxpayers and amount owed by state for estate tax returns filed in 2007, so I used those numbers to allocate our national estimates of the number of taxable estates by state. Since the exemption level will be higher in 2011 if Obama's proposal is enacted ($3.5 million in 2011 versus $2 million in 2007), this isn't entirely kosher, but it gives a rough gauge of differences among states.

We estimated that in 2011, there would be 6,160 taxable estates of which about 100 would be small farms and businesses. The following table estimates the allocation by state under two different assumptions: (1) that the state numbers are in proportion to the number of taxable estates in each state, and (2) that the number is proportional to the amount of estate tax paid in each state.

These results are illustrative rather than precise predictions for several reasons. To start, our estate tax projections are based on a model and subject to uncertainty. We estimated that there would be 100 taxable small farm and business estates in 2011, but those estimates are based on pretty small samples in the underlying data, and it is very hard to predict what could happen to asset values over the next few years. The true number could be 50 or 150. Second, some states might have disproportionate numbers of farms or businesses among their taxable estates. Third, the distribution of estates by size within each state probably differs. Thus, a $3.5 million exemption might reduce the number of taxable estates by more in state X than state Y.

That said, the numbers shown above seem plausible and somewhat interesting. The underlying spreadsheet is here.

Cheers.

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