Yesterday, family business owners in The Diamond State were happy to hear that the state Senate passed a bill, repealing Delaware’s estate tax. Despite the fact that estate tax repeal is a traditionally Republican priority, several Democrats crossed the political aisle to repeal the tax. For many business owners in Delaware, the relief couldn’t have come soon enough. Currently, Delaware’s estate tax exemption is set to match the federal exemption level of $5.49 million, however, for many inventory-heavy Delaware businesses, the additional state estate tax can have crippling economic effects. Often, business owners are forced to sell off large portions of their companies or close entirely in order to meet the demands of the tax.

It has been proven that in Delaware and in other death tax states across the country, the net benefit of the tax is negligible, frequently causing more financial harm than good. State finance officials in Delaware project an average yield of $5 million dollars a year from the death tax, however, that profit is largely dependent on who dies. For example, in 2014, the state only netted slightly over a million dollars in estate tax receipts – a small amount of money for the state, but for a business owner, that capital could have meant the difference between expanding the business or hiring more employees.

With tax-friendly states like Virginia so close, legislators in Delaware recognized that the tax was driving valuable contributors to the economy away from the state. In a story that plays out in death tax states across the country, business owners flee from the state, taking the economic prosperity that comes with their business with them to other states. Delaware was one of only 18 states that levies a transfer tax. Many traditionally blue states are moving towards eliminating their death taxes entirely, and these victories demonstrate how a growing number of state governments are committed to pro-growth reforms that add certainty in the tax code, making it easier for main street businesses to plan for the future.

The Delaware House voted for estate tax repeal in mid-May, with ten House Democrats supporting the bill. Governor John Carney has pledged to sign the legislation. The Family Business Coalition applauds the State of Delaware for working in a bipartisan fashion to eliminate the state’s death tax.



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