Estate tax repeal could leave hole in Nevada’s education budget

Monday, Aug. 2, 1999 | 8:49 a.m.

The phase-out of the inheritance tax was included in the House Republicans' plan for a tax cut, which passed last week. The Senate version of the bill, which passed Friday, provides for a break on the federal estate tax but doesn't repeal it. President Clinton has vowed to veto the bill as its written.

The tax, which Nevada has collected since 1986, raises about $28 billion a year for the federal government - a small percentage of its budget. Under the current law, the state is able to collect a share of the tax that would have otherwise gone into federal coffers.

For Nevada, those funds range from $8.5 million to $30 million a year, depending on how many rich people die in the state.

If the federal estate tax were phased out, as the House bill provides, the state would lose that income.

That money has been split 50-50 for public schools and the state's universities and community colleges. The school districts have used the money - $13.8 million this year - for class-size reduction. The higher education portion has gone into an endowment. The interest from that endowment has paid for several programs, including funding some research.

In addition, the 1999 Legislature authorized the university system to spend $55.2 million in estate tax revenue to work on equalizing funding between the campuses in southern and northern Nevada.

Doug Thunder, deputy state superintendent of public instruction for finance, said the repeal of the inheritance tax would leave a void in the public school budget.

Without the annual collections, the university system's endowment would be eaten away, said Tom Anderes, interim chancellor of the university system.

The estate tax under the House GOP version would be phased out over 10 years. Rep. Jim Gibbons, R-Nev., said that's plenty of time for the state to find ways to replace the money. Gibbons was the only member of the Nevada congressional delegation to vote for the GOP tax bill. The three Democrats on the delegation opposed the idea.

Figures from the Internal Revenue Service shows that in 1996 the average tax on estates of $600,000 to $1 million was 6 percent. But the rate on the largest estates can be as high as 55 percent.