Last November, the IRS announced the estate tax limits for 2019.
The individual exemption for estate and gift taxes was set at a comfortably high $11.4 million, with the tax shield for married couples at double that amount. This compared favorably to the $11.18 million limit established for 2018, although in both cases the amount was pretty heady, offering good estate planning opportunities for wealthy people.
In California, where the Democratic Party controls both houses of the state legislature, these limits appear inflated beyond decency. Moves against estate tax relief started in 2017, when Senator Scott Wiener introduced Senate Bill 726. This initiative proposed introducing a state estate tax to replace the federal tax that President Donald Trump was then planning to repeal. Now, with the new federal estate tax limits in place, the California legislature again hopes to cancel its effects, at least within the limits of the state’s borders.
There is a catch. In 1982, Propositions 5 and 6 eliminated estate and gift taxes in California. This might not seem much of an obstacle, but included in the bills was a prohibition against ever reintroducing such taxes in the future – without, that is, conducting a referendum of the voters.
Sponsors of the new legislation say it could collect as much as $1 billion in taxes, which would be directed to assist the state’s poorest residents. Senator Weiner said this could help struggling families “build wealth and end the cycle of intergenerational poverty.”
The proposal, entitled SB 378, would establish an individual tax on estates larger than $3.5 million. Provisions are included to prevent double taxation, a common problem with estate and gift taxes. If the legislature votes for the initiative, the bill’s referendum would be held during the state election in November 2020.
For more information, please read:
California voters could be asked to impose an estate tax, replacing the one Trump loosened | Los Angeles Times