PA Inheritance Taxes apply in many more cases than Fed. taxes

[JPZenger]

There has been much discussion about Federal inheritance taxes, which very few people pay. However, PA. inheritance taxes hit many more people.

PA. has a Constitutional provision saying that all tax rates must be uniform. This has been interpreted by the Courts as saying we cannot have a progressive income tax (unlike most other states). Therefore, everyone pays the same 2.9% income tax rate, whether they are a waitress or a CEO.

The same rule has been applied to inheritance taxes. Spouses generally are exempt, and children pay 4.5%. Siblings may 12%. However, everyone else (such as nephews) pays 15% of the inheritance in State taxes, regardless of the size of the estate. Therefore, a $100 million inheritance has the same percentage tax rate as a $10,000 inheritance. (The truly rich make sure they are counted as residents of a state that has no inheritance tax.)

Therefore, in PA, almost everyone pays inheritance taxes, while under Federal law, it is limited to deaths involving a multi-million dollar estate.

http://www.finance.cch.com/pops/c50s15d170_PA.asp