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Lynnfield’s DiVirgilio wants estate-tax reform

Al DiVirgilio. (Owen O'Rourke)

LYNNFIELD — A Lynnfield man who once served as the mayor of Lynn is helping lead the charge to amend Massachusetts’ estate tax law — aiming to reform the policy, which he feels has created an “injustice” for many, due to the rise of housing costs and inflation.

Albert V. DiVirgilio, who served as the mayor of Lynn from 1986 to 1991, has been pushing for changes to the law as part of his work with Massachusetts Retirees United, an advocacy organization for retired public employees. 

As currently structured, the state’s estate tax law taxes all the money in estates exceeding $1 million — meaning an estate worth $1.1 million would be taxed on all $1.1 million, not just the $100,000 over the limit. Just 10 other states have estate taxes, and only Oregon matches the $1 million threshold in Massachusetts.

However, estates exceeding $1 million in Oregon are only taxed on the money exceeding that limit, a key difference from the policy in Massachusetts, which DiVirgilio says many are unaware of. 

“The estate tax has always existed, but it’s something no one paid attention to because very few people in the state would have an estate that was a million dollars,” DiVirgilio said Wednesday. “But, with the increase in real estate values throughout the state, especially here on the North Shore over the past couple of years, all of a sudden, people have estates at over a million dollars because of the value of their home, their furnishings.”

Gov. Charlie Baker, as part of his $48.5 billion spending plan, submitted to the state legislature in January, called for a number of new tax breaks for residents — including reshaping the estate tax. Under Baker’s proposal, the estate tax threshold would be doubled, bringing it to $2 million, and the state would only tax the amount over $2 million in a given estate. 

Baker’s tax relief package was not included in either the House or the Senate’s budgets, but, last month, Senate President Karen E. Spilka indicated that the Senate would be pursuing a “tax relief package” before the end of formal sessions next month. House Speaker Ron Mariano expressed similar sentiments, noting that the House was working on a tax relief bill and hoped to pass something before July. 

DiVirgilio said he was hopeful the legislature would take action on the estate tax issue in four to six weeks, noting that he believed Baker’s proposal was a good compromise.

“You’d like it to be in line with the other states that charge absolutely nothing,” he said. “But at the same time, you would look for a compromise.”

With the state bringing in billions more than anticipated in tax revenue this year, DiVirgilio said the time is now to reform the estate tax law.

“This is the year to do it because the tax revenues were very good last year, and the tax revenues are going to be even better this year [so] the change in the law can take place without penalizing any other program that the state has,” he said. 

By amending the law, the state would face a decline in the amount of revenue it collects in taxes each year. But, DiVirgilio said, the amount could be made up, if fewer people seeking to avoid the tax established residency in other states. 

Changing the law would “at most” cost the state of Massachusetts $234 million, according to Department of Revenue estimates, DiVirgilio said, noting that the figure “does not take into consideration all of a sudden people not moving out of the state and staying in the state and paying the state income tax and paying their sales tax and other things 12 months a year instead of only six months a year.”

“It could come out and be neutral,” he said.

With the average price of a single-family home in Massachusetts reaching an all-time high of $560,000 in April, according to The Warren Group, a Peabody-based real estate market watcher, many residents of the state likely have estates worth more than $1 million.

“When you’re talking about your estate, it’s the value of all your personal property, the value of a bank account, the value of a life insurance policy, the value of your home, where maybe you might have had only 5 percent [of people] 10 years ago, now maybe it could be up to 25 percent of the people,” he said. “In Lynn maybe only 10 percent, but if you go to Marblehead, Swampscott’s probably going to be closer to 75 percent of the people will be affected by it.”

On an estate worth $1.5 million, estate taxes could exceed $68,000, according to the Massachusetts Taxpayers Foundation. DiVirgilio said the tax was especially punishing for those who see the value of their homes as the legacy they are leaving behind for their children. 

“The value of a house is something that people will always consider … the way it’s set up right now probably the biggest expenses you have in your lifetime are your marriage and your death,” he said. 

With inflation continuing to rise, DiVirgilio said he hoped the legislature would consider adjusting the threshold of the tax for inflation.

“They should consider making … whatever deduction they come up with, might be adjusted for inflation. So they don’t have to deal with the subject again,” he said. 

Charlie McKenna can be reached at charlie@itemlive.com.

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