Measure 84, if passed, does two things: 1) it eliminates the Oregon estate tax, and 2) it eliminates Oregon capital gains on property transfers between family members. Measure 84 phases out the Oregon estate tax gradually over three years, with a tax decrease of 25% in 2013, 50% in 2014, and 75% in 2015. In 2016 the tax disappears entirely.
Eliminating Oregon Estate Tax
If you are a wealthy Oregonian, Measure 84 will benefit your heirs by eliminating the Oregon estate tax. The current Oregon estate tax kicks in at estates valued over $1 million, meaning your estate pays a tax on every dollar over $1 million. If you are married, your effective Oregon exemption amount doubles to $2 million if you properly set up a bypass trust. Unlike the federal estate tax, you can always give away assets before your death without triggering a lookback in Oregon. Of course gifting strategies are not without their problems, which is a nice segue to the second part of measure 84.
No More Capital Gains
Measure 84 prohibits any new tax on transfers among living family members, which primarily means capital gains. This portion of Measure 84 is more widely useful than the elimination of the estate tax itself.
Let’s go back to our gifting problem for a minute. The problem with gifting strategies of non-cash assets is that the recipients take the same basis as the grantor. So for example, if you give your child a home valued at $500,000, but you purchased that home for $100,000, your child would pay capital gains on $400,000. If your child inherited that house from you, he or she would take a basis at the current market value of $500,000. Measure 84 gives you a way around this. Keep in mind this only applies to Oregon capital gains and other transfer taxes, and that federal capital gains still apply.
Who Sponsors Measure 84?
Kevin Mannix. Kevin Mannix is a Salem-area lawyer, former Oregon House Representative and Gubernatorial candidate. He is also a frequent proponent of Oregon ballot measures. In fact, Mannix-backed initiatives are nearly annual fixtures on the Oregon state ballot. You may remember him from infamous ballot measures past such as Measure 11, which created mandatory minimum sentences, and Measure 40, which was overturned by the Oregon Supreme Court.
Is Measure 84 a Good Idea?
That depends on who you ask, and it is beyond the scope of this article to examine the long term financial implications to the State of Oregon.
The Oregon Family Farm Association to Associated Oregon Industries endorses Measure 84, and TV and radio spots frequently tout preserving family farms as one of the measure’s chief goals. But in all fairness, family farms aren’t really in jeopardy of being broken up and sold to pay Oregon estate taxes under current law anyway. Family-owned natural resource properties worth up to $7.5 million already qualify for a state tax credit against their estate tax liability. Measure 84’s estate tax repeal primarily benefits wealthier Oregonians and privately held non-farm Oregon family businesses.
The Nonprofit Association of Oregon comes out against Measure 84, citing the Oregon Department of Revenue’s figure that phasing out the estate tax would eventually (once the tax is fully repealed and assuming no other sources of revenue are introduced to offset the lost inheritance tax) cost Oregon $120 million per year in lost revenue. The Association also cites the possibility of fewer charitable gifts made to avoid tax liability if Measure 84 goes into effect. None of this would be certain until several years into the repeal, assuming it is not otherwise amended or modified and that Oregon does not introduce a new means of offsetting revenue.