More Than Half of Prince’s Estate May Go Towards Paying Death Tax Bill
Paisley Park puts a spotlight on Minnesota’s burdensome death tax policies.
There is more sad news at Paisley Park: although Prince fiercely protected his successful music career, more than half of his estate may go to the tax man instead of his loved ones. Since Prince did not leave a will, experts estimate the total value of his estate to be at least $100 million, with one estimate as high as $300 million. Prince’s estate must pay the federal death tax rate of 40 percent, as well as Minnesota’s top death tax rate of 16 percent on everything from the value of his home to whatever the government determines his private, unsold music is worth.
Minnesota’s death tax policy is a penalty against art and an obstacle to opportunity. For the privilege of dying in the North Star State, Minnesota imposes a death tax rate ranging from 10 percent to 16 percent. The state’s exemption for the 2016 taxable year is $1.6 million. In addition to the pain of losing a loved one, Minnesota families are left with a hefty federal and estate tax bill. Furthermore, the state’s death tax was one of the economic variables that earned the state a dismal ranking of 45 in the 2016 Rich States, Poor States economic outlook rankings.
As the ALEC Center for State Fiscal Reform study, Rich States, Poor States points out, “the estate tax is not just unfair— it is a killer of jobs and incomes in states.” Studies show that the death tax has high compliance costs, discourages capital investment and collects very little revenue. According to the National Bureau of Economic Research, states can lose as many as one out of three dollars collected from their estate taxes, since many seniors leave to protect their estates from the tax. Furthermore, the death tax is a barrier to taxpayers trying to keep farms and small businesses in the family.
Paisley Park puts a spotlight on Minnesota’s burdensome death tax policies. Minnesota’s 2014 death tax reform efforts earned the state a mention in the annual State Tax Cut Roundup. Although Minnesota’s estate tax exemption will gradually increase to $2 million by 2018 and the gift tax is eliminated, Minnesota families still must pay the federal death tax. The coming battle over Prince’s estate serves as a lesson to taxpayers: do not die in Minnesota.