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Will Oregon's Death Tax Kick the Bucket?

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In 2001, all 50 states had an estate tax.  This is an additional tax separate from the federal estate tax; and also in addition to income, sales, and property taxes.  Since 2001, 30 states have eliminated their estate tax or are in the process of doing so.  Oregon is one of only three states west of the Mississippi still with a death tax, with our neighbor to the north being another; although Washington’s tax-free exemption is twice Oregon’s.  

There is currently an initiative on the November ballot in Oregon to repeal Oregon’s estate tax.  This Death Tax Phase-Out Act (Measure 84) would reduce the existing tax each year until 2016, when it would reach zero.  The tax currently applies to the amount of an estate over $1 million - which, coincidentally, is the minimum amount many financial experts say that baby boomers should possess in order to not outlive their assets.  

Oregon estates may be exempt from the federal estate tax, but without proper planning your heirs will receive a fraction of the value of your estate after Oregon takes its bite.  

Unfortunately, Oregon only has two large (Fortune 500) corporations: Nike and Precision Castparts. (The sad fact that Oregon is home to only two major corporations is another story for another time.) Hence, many of the jobs created in Oregon come from small, family-owned businesses which would be threatened in the event of a death.  In many cases, the only way to pay the tax due upon death is to sell the family business, farm or ranch, since the property is often of far greater value than the income produced.  

With an estate tax, after a person’s money, property and possessions have already been taxed, they are re-taxed at the time of death.  It’s not surprising that the majority of states have seen how this tax has actually reduced state revenues instead of increasing them; Oregon’s estate tax appears to punish those who build and keep businesses in Oregon, and incents business owners to move to a ‘death-tax-free’ state.  

To see how your state compares to others, check out http://www.retirementliving.com/taxes-by-state.  Or, you can read an article at Forbes.com: just search for “Where not to die in 2012”.