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Originally published Friday, May 31, 2013 at 3:59 PM

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Editorial: Don’t just ‘fix’ the state estate tax, repeal it

Washington’s estate tax is set to be “fixed” by the Legislature. Really it should be ended, or at least cut back.

Seattle Times Editorial

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LEGISLATORS in Olympia are about to repair a hole in Washington’s estate tax that was made by the Washington Supreme Court. Far better than fixing this damaged tax would be to repeal it entirely.

This is no argument for the wealthy to escape taxes. But attempting to tax their estates heavily, one time, in addition to the federal estate tax that already does this, is not the best way to make them pay.

Washington’s top rate of estate tax is 19 percent, the highest of the 14 states that have this tax. The top federal rate is 35 percent. To escape state estate taxes, some business owners can establish homes in states that levy no such tax, such as Arizona, and many do.

Our state is better off by keeping the wealthy and their job-creating work here, subject to the continuous nibble of sales taxes, property taxes and business taxes.

Too many legislators see only the dollars collected by the one tax and not the dollars lost from other taxes because wealthy taxpayers leave.

Now about the hole in the tax. Last fall, the Washington Supreme Court ruled in the Bracken case that married couples can escape the tax by creating a certain type of trust, but that unmarried people cannot. Under its ruling, the state Department of Revenue is supposed to pay refunds totaling $42 million to 68 estates.

The department should have paid them, but instead the agency waited for the Legislature to let it off the hook. Because the Department of Revenue intends to send out the refunds, lawmakers have started to act on House Bill 2064, changing the law retroactively back to 2005, letting the state keep the money. It passed the House Thursday.

Instead of the fix-only bill, the better choice is Senate Bill 5939, sponsored by Sen. Andy Hill, R-Kirkland. In addition to the fix, this bill would gradually raise the minimum taxable estate from $2 million to the federal minimum, now $5 million, by the end of 2017, and gradually shave down all the rates of tax by one-quarter by July 1, 2022.

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