However, President Clinton vetoed the legislation and Congress did not muster the necessary votes to override the veto. However, newly-elected President Bush has indicated his support of the repeal of the estate tax. In 1993, Michigan repealed its own estate tax. Those paying the estate tax qualify for a dollar for dollar credit toward the federal estate tax liability of the tax, up to an upper limit. The credit hits a cap based on the size of the estate.
Federal tax is paid on the amount that exceeds the cap.
The inheritance or estate tax in Michigan is linked to the federal tax. The state receives the amount allowed as a credit against the federal estate tax. States relying only on the pick-up tax are at risk if the tax is repealed at the federal level. The pick-up tax can either be replaced with another form of estate tax, unlikely in Michigan, or the state can absorb the revenue loss. Representatives of the Governor's office have indicated that it is likely that Michigan will absorb this revenue loss.