Pick-Up Tax

A “pick-up tax” was kind of the equivalent of states saying, “Yeah, what they said,” when it came to federal estate taxes.

For estates larger than a certain size (roughly $11 mil per tax-filing individual as of 2018), the federal government collects a tax when the estate’s owner passes away. It’s called—wait for it—an estate tax.

Some of the states decided they wanted to get in on the estate tax action as well, but they didn’t want to invest a bunch of time and money into the whole process when, let’s be real, most folks don’t have estates worth more than eleven million dollars. So instead, they set up what was known as a “pick-up tax”: whenever the federal government collected an estate tax, they’d get a little piece of it. Sometimes it was less than one percent, sometimes it was over 15%, but it was, essentially, a state’s cut of the federal estate tax.

Nowadays, some states have abandoned the pick-up tax idea in favor of just setting up their own estate and inheritance taxes.