sponge tax

English

Noun

sponge tax (plural sponge taxes)

1. (US, law, historical) An estate tax imposed by a state that was credited against the federal estate tax, raising revenue for a state without increasing the overall tax burden.
   • 2020, Elspeth B. Cypher writing for the Supreme Judicial Court of Massachusetts in Shaffer v. Commissioner of Revenue, case number SJC 12812[1]:

     Following various versions of the Massachusetts estate tax in response to the changes in the Internal Revenue Code, in 2002, the Legislature amended § 2A to use a "sponge tax" calculation based upon the Federal credit for State death taxes that would have been allowable to a decedent's estate in 2000.