Sunday, September 17, 2006

Gubinatorial Candidate Swann vs. PA Inheritance Tax

Republican candidate for Governor, Lynn Swann, proposes to eliminate the Pennsylvania Inheritance Tax (PIT).

In a
statement on his campaign website, posted September 7, 2006, his position is made clear:

Swann has proposed a plan to phase-out the inheritance tax rates in order to provide relief for small manufacturing and non-manufacturing businesses and vital family-owned farms in Pennsylvania, which is only one of nine states still imposing an inheritance tax.

On September 7, 2006, the Pittsburgh Post-Gazette published an article entitled "Swann Targets Inheritance Tax Again" referencing Swann's position on repeal or phase-out of the PIT, which the candidate repeated during a vist to a small business in Harrisburg. That story indicated, in part, as follows:

Republican gubernatorial candidate Lynn Swann yesterday reiterated his call to phase out the state's inheritance tax, which raised $745.2 million last fiscal year.

He would make up for the revenue loss through unspecified spending efficiencies, Mr. Swann said during a campaign stop yesterday at the W.O. Hickok Manufacturing Co., a Harrisburg business owned by the same family for 162 years and five generations.

The state inheritance tax could stand in the way of a sixth generation taking over the company, Mr. Swann said.

The tax can be up to 15 percent of the estate's value, depending on a beneficiary's family relationship to the deceased.

"We're talking in the millions, and we don't have that cash flow. All our money is sunk in the business," said Peter Hickok, owner of the manufacturing plant, during a phone interview after Mr. Swann's visit. "Basically, my heirs would have to sell the business to pay the tax on it."

That's the kind of thing Mr. Swann wants to prevent.

Also on September 7th, in an article entitled "Swann Blasts Inheritance Tax", the Allentown Morning Call reported that Swann "wants to phase out the levy over four to seven years".

The article noted the revenue raised by the PIT:

The state took in $745 million from the tax in the 2005-06 budget year and expects to reap $778 million this year, according to the state Department of Revenue. Swann did not spell out how he would replace those revenues.

The state taxes inheritances at a rate of 4.5 percent — down from 6 percent in 2000 — for direct descendants such as children and 15 percent for so-called ''non-lineal'' heirs, budget figures showed. Spouses are exempt.

In an article posted online by the Centre County Times entitled "Swann Tax Cuts Worth $2.5 Billion", it was noted that Rendell's campaign challenged Swann's assertion that the tax cuts can be absorbed without significant cuts in state programs:

"The magnitude of the tax cuts that Lynn Swann is talking about will necessitate deep and severe cuts to essential government services," said spokesman Dan Fee. "Either Lynn Swann doesn't intend to keep the promises that he makes or he's not telling the truth."

* * *

Fee questioned the reliability of Swann's plan, noting his recent decision to prolong the proposed phase-out of the inheritance tax from a maximum of seven years to a maximum of 12.

"How can anyone say that there's a level of predictability when (he) is changing it just weeks after he proposed it?" he asked.

On September 7, 2006, the Governor's Campaign website had posted a Press Release criticizing Swann's plan. However, it did not mention any position by the Governor as to the present or future application of the Pennsylvania Inheritance Tax.