In our wealth management work at Spinnaker Trust, we advise hundreds of clients on how best to reach their financial goals. A significant part of our work centers on taxes, both income and gift and estate taxes. Accordingly, we work closely with our clients’ attorneys and accountants on all tax aspects of our clients’ lives.

It is with this insight that we can definitively state that lowering Maine’s estate tax exemption would drive higher-net-worth Mainers to other states and further shift the tax burden to the middle class.

Many of the clients with whom we work have already changed their domicile to an estate tax-friendly state. With far less than half of the states having an estate tax or inheritance tax, the choices are plentiful. The increase in the Maine exemption amount in 2016, coupled with the federal exemption of $5 million (indexed for inflation), helped to slow the flow of residents leaving the state. However, the Maine Legislature is considering L.D. 420 and L.D. 518: two bills that would reduce the exemption to $2 million and $1 million, respectively.

As a parent, I support investments in our schools. As a native Mainer, I support investments in our infrastructure. As a business leader, I support investing in our workforce and economy. Unfortunately, reducing the estate tax exemption would not, as intended, increase revenue for these investments. In fact, it would have the opposite effect.

The reality is that adoption of either bill would simply incentivize those who have not already changed their residences to do so. I have had many conversations over the years with clients about their domicile, and while many are loyal Maine residents, inevitably, the tax burden becomes too much to justify.

Consequently, instead of increasing revenue, Maine would lose revenue as these families take not only their future estate tax payments out of state, but also their current state income tax payments. As a result of this short-sighted action, the tax burden would further shift to Maine’s middle class.

For example, the small-business owner who owns the real estate from which they operate their business could easily have an estate that exceeds a $1 million exemption amount, leaving their family to wrestle with how to pay a Maine estate tax with an illiquid estate. The multi-generational lobstering family that owns a parcel of land on the water where they dock their boats and store their traps would now have to worry about how to keep that parcel in the family when the matriarch or patriarch dies.

These folks do not represent stereotypes of the uber-rich. These are people central to Maine’s identity, and most of them are currently protected from this additional tax burden. Reducing the exemption amount to $2 million or $1 million would force many of these families to make painful choices.

Lowering Maine’s estate tax exemption, as these bills propose, would make it punitive to remain a Maine resident. If the need for revenue is real, then Maine does not have the luxury of discouraging people from becoming or remaining residents of our state. We need people to want to come here, and once here, we need to encourage them to stay.

These bills do the exact opposite, and they reinforce the well-evidenced belief that the estate tax policy in Maine is constantly shifting, making it impossible to plan. The uncertainty this would sow among taxpayers is yet one more reason for them to change their residency and avoid the issue altogether.

Passage of either bill would put Maine at a competitive disadvantage in attracting and retaining high-net-worth individuals to live, work and retire in our state. It would take our tax policy backward, and those we seek to help would be hurt the most.