WASHINGTON – Gov. Paul LePage and many members of the state Legislature are on to something: Maine’s state estate tax policy is bad policy.

LePage has proposed raising the estate tax exemption while state lawmakers have proposed create a more progressive rate.

Unfortunately, while they correctly diagnose the problem, they have the wrong prognosis. Raising exemptions or making rates progressive ultimately will not help improve Maine’s economy.

If Maine wants to be competitive with most other states and stop driving out its most productive residents and destroying jobs, then the best policy would be complete repeal of the state estate tax. Anything less will fail to fix the problem.

Maine’s estate tax currently hits any family that has amassed more than $1 million, which is much lower than the current federal estate tax exemption of $5 million. Family business owners and farmers are particularly susceptible to the tax.

Consider Ron Dennis, owner and president of Hampden’s hundred-year-old Dennis Paper and Food Service. Dennis’ immigrant grandfather started the business shortly after arriving in the United States. He grew the business gradually, expanding as he was able, all the while creating jobs and prosperity in Maine.

His son and grandson continued the tradition, and Ron would like his children to have the same opportunity.

Unfortunately, the Dennis family may be forced to sell the business due to looming estate tax liabilities, including Maine’s state estate tax.

And the out-of-state corporations already know it. They have made offers to purchase the company and absorb its resources. While the purchase would save Ron an estate tax headache, it would also move jobs out of Maine.

Ron isn’t alone. Kevin Hancock is the president and CEO of the six-generation-owned, 200-year-old Hancock Lumber, based out of Casco.

The Hancock family practices sustainable, multigenerational tree farming — meaning the trees planted today will be harvested by Kevin’s grandson. Trees from the company’s 30,000 acres of timberland once provided masts for the British Royal Navy.

Today, those same acres provide jobs for over 500 local workers and green-space and outdoor recreation areas for the public.

As Kevin explained in testimony he presented before the U.S. Senate, “to pay the death tax, we will be forced to sell part or all of the business.some of the forestland will likely be the first to go.”

The forestland largely borders suburbs in southern Maine, meaning developers would likely gobble up the real estate, clear cutting the nearly 100-year-old forest.

With the forest will go the mills. Jobs will be lost. A small but important sliver of Maine’s economy will die.

Maine would do well to take note of the results of a recent Connecticut Department of Revenue study, which found that states without an estate tax produced twice as many new jobs and their economies grew nearly 50 percent more from 2004-2007 than states with such taxes.

And an American Family Business Foundation study, authored by a former director of the Congressional Budget Office, found that without a federal estate tax, 1.5 million new jobs would be created.

Conversely, for every $1 increase in federal estate tax revenues, state and local governments lose almost $3 in non-estate tax revenues.

Repealing Maine’s estate tax would have a similar positive impact on increasing both job creation and local and state tax revenues.

While Maine considers tepid reforms to its estate tax, Ohio, Illinois, Indiana and Pennsylvania are leading the way in repealing their estate and inheritance taxes.

Just last month, Ohio passed repeal through the state House of Representatives and is expected to pass it through the Senate by early June.

If this happens, Ohio will become a hot destination for wealthy retirees and their investment. States which continue to impose estate and inheritance taxes will remain the losers.

Maine has an opportunity to get ahead of the game, attract investment, and create jobs.

LePage should take the state motto, “Dirigo,” (Latin for “I lead”) to heart and send the Legislature a proposal to permanently repeal Maine’s estate tax.

The future of family businesses such as Dennis Paper and Hancock Lumber stand in the balance. 

– Special to The Press Herald