Innovation Ohio Says Mend, Don’t End, Estate Tax

For Immediate Release: June 9, 2011

Contact: Dale Butland, 614-783-5833

INNOVATION OHIO: MEND–DON’T END–ESTATE TAX

Columbus—Innovation Ohio, a progressive think tank headquartered in Columbus, today called on the General Assembly to “mend, not end” Ohio’s estate tax. IO’s recommendation comes after the Senate on June 8 joined the House in eliminating the tax in their versions of HB 153 (the “budget bill”). The estate tax was not eliminated in Gov. Kasich’s original budget proposal and Innovation Ohio suggests that it be removed in conference committee.

The tax, which affects an estimated 7-10% of Ohio families, raised $286 million in 2010. 80% of that revenue ($230 million) went to local governments, and the remaining 20% to the state.

IO believes that the current estate tax threshold, $338,334, is outdated and hits many middle class families because home values and retirement accounts are included in asset calculations.

By contrast, the federal estate tax applies only to estates valued at over $5 million (thus affecting less than 1% of the population), while most states imposing this tax exempt estates with assets of less than $1 million.

IO recommends that Ohio raise its estate tax threshold to $1 million to be in line with other states and raise the taxation rate to the national average of 16%. Under current law, Ohio taxes estates valued at $338,334-$500,000 at 6% and estates valued at over $500,000 at 7%.

According to the state Department of Taxation, 7,444 Ohio estates were subject to the tax in 2010, with just 24% of them valued at $1 million or more. However, this 24% (roughly 1,500 estates) provided 75% of all estate tax revenue (“Kill Ohio’s ‘Death Tax’?” Cincinnati Enquirer, May 29, 2011). Therefore, IO’s proposal is likely to be revenue neutral or nearly so.

Said IO Communications Director Dale Butland:

“At a time when Gov. Kasich is proposing to cut the local government fund by 50%, Ohio’s cities, towns and municipalities simply can’t afford another major hit to their revenue. If the estate tax is killed, many will have no alternative but to raise local taxes. And it is simply not fair to eliminate a tax on the top 10% and ask the bottom 90% to pay for it.

“At the same time, Ohio’s current estate tax hits too many middle class families who should not be penalized for owning a home and saving for their retirements, especially since they are already being asked to sacrifice by bearing the brunt of the administration’s proposed budget cuts. Millionaires and billionaires, however, so far have not been asked for any sacrifice at all.

“Moreover, dynastic wealth is inimical to the ideals upon which America was founded; all people should have to work, no one should get a free pass, and those lucky enough to be born into families with successful ancestors should not be guaranteed lives of ease.

“With a $1 million exemption, immediate heirs of wealthy individuals will still be rich; none will go to the poor house. But neither should we be asking middle class families to pay more so that millionaires and billionaires can pay even less.

“Finally, IO calls on Gov. Kasich and his allies to end the scare tactics. Stop telling us that if we don’t repeal the estate tax, wealthy Ohioans will all move to Florida, or Arizona, or some other Sun Belt state. Those who can afford to retire in Florida do so primarily for the weather; that is why elderly Ohioans don’t flock to Michigan, North Dakota, Nebraska, or New Hampshire, even though they don’t have estate taxes either. Hawaii, of course, IS a popular retirement destination. Despite its estate tax.”

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