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

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