Over the last several years, several of our clients have changed their residences to Florida to avoid certain Tennessee taxes, including our inheritance taxes. Migration to avoid state inheritance taxes has also been occurring in other states.
Last week, the Wall Street Journal published an article about various states, including Tennessee, that are considering a repeal of their death taxes. The article states that “the main obstacle to reform in Nashville is GOP Governor Bill Haslam…”
Governor Haslam responded to the Wall Street Journal by writing a letter to the editor. In his letter, the governor points out that he has recommended repealing the taxes in the next three years and that he has worked with House Finance Committee Chairman Charles Sargent to completely repeal the taxes in four years. Indeed, the House Finance Subcommittee has recommended an amendment to House Bill No. 3760 that would increase the inheritance tax exemption to $1,250,000 in the year 2013, $2 million in the year 2014, $5 million in the year 2015, and would totally repeal Tennessee inheritance taxes beginning in the year 2016. I find it interesting that our state legislature has taken some lessons from recent federal tax cuts. If we can’t afford a tax cut now, phase it in so that the impact will be postponed to future years when revenue collections will hopefully be better. The danger with a phase-in approach is that it is easier for future legislatures to “change their mind.”
Normally, I would be skeptical that a bill with a large tax cut would survive the final budget cut. However, the governor’s unusual public support for the cut gives me reason to hope that this change will be made.