Without Adequate Public Debate — Republican Assembly Rushes To Eliminate Ohio’s Long Standing Estate Tax

Ohio's estate tax applies to about 8% of Ohio's wealthiest families. Most family farms are exempted. (This chart is from the Policy Matters report cited below.)

Republicans in the Ohio Senate, by a strict party line vote, 23-10, have concurred with The Republicans in the Ohio House (House Bill 153) to eliminate Ohio’s estate tax, effective in 2013.

My search through Google this morning turned up some interesting information, but overall, my search revealed that there has been inadequate debate concerning this big change in long standing public policy in Ohio.

Both my representative to the Ohio House, Republican Jim Butler, and my Ohio State Senator, Republican Peggy Lehner, voted to repeal the estate tax, but I can find no record on Google where either have made any substantive statement explaining their positions on any of the Kasich agenda they have pushed through. It is astounding that the public tolerates such a lack of transparency from their elected officials.

Americans For Prosperity, a long-time proponent of eliminating this tax, boasts that this repeal was hastened by the intense activity of their members signing petitions and sending thousands of e-mails to Ohio Assembly members.

Here is some other information I found interesting:

• Former State Rep. Seth Morgan, AFP State Director, condemned the tax as “immoral.”
• Jim Butler, the Oakwood Republican appointed to represent the 37th District that includes Kettering, where I live, was quoted by the DDN as saying, “When we only tax one segment of population, it’s a tyranny.”
• Charles Horn, former Kettering mayor, wrote a letter to the DDN in which he declared the estate tax a “clear detriment.” He said, “The tax encourages our most valuable citizens to establish residence in other states, taking their money — but more important, their knowledge, experience and business resources — with them.”
• Columbus Mayor Mike Coleman was quoted in the Columbus Dispatch that eliminating the estate tax would benefit the wealthy at the expense of public services for the majority of state residents. “It’s immoral to cut taxes for the rich while cutting services to ordinary people,” Coleman said.

Ohio original estate tax dates back to 1893. Its repeal has been pushed by many conservative groups including the Ohio Christian Alliance who declared it “unjust.”

The estate tax applies to about 8% of Ohio’s estates and is both the lowest rate and applies at the lowest threshold of all states with estate taxes. About Ohio’s estate tax, Forbes reports,

“Estates with a net taxable value of $338,333 or less are effectively exempt from Ohio’s estate tax. A 6% tax rate is levied on estates with a net taxable value between $338,333 and $500,000. Estates with a net taxable value over $500,000 are subject to a 7% tax rate.  According to the Ohio Department of Taxation, Ohio’s estate tax generated $333.8 million in fiscal year 2009—$64.4 million distributed to the state general revenue and $269.4 million to local governments (reflecting a state share of 20% and a local share of 80%)”.

Without income from the estate tax, many local communities will be forced to raise local taxes or lay off workers or reduce local services.

Tax justice writes:  “In the end, state policymakers are simply passing the buck to local officials who will have to enact spending cuts or tax increases to make up for the lost revenue. Those measures will be probably be hugely regressive compared to the estate tax, which is among the most progressive taxes levied in Ohio.”

A editorial in the Toledo Blade says:

For reasons that have more to do with anti-tax political ideology than fiscal responsibility or economic efficiency, the Republican majorities in both houses of the General Assembly want to abolish the estate tax. That would compound the pain to local communities in the proposed state budget for the next two years, which also would chop the revenue-sharing Local Government Fund in half.

Adoption of both ill-considered proposals would make local property tax increases and layoffs of public employees nearly unavoidable. Even Gov. John Kasich, as red-hot a tax cutter as they come, kept the estate tax in his budget plan.

GOP lawmakers do not make a compelling case for giving a big, unnecessary tax break to a small number of the richest taxpayers in the state, at the expense of middle and low-income taxpayers and the communities where they live. Especially given the battered fiscal condition of local and state governments, there is no reason to scrap the estate tax.

Zach Schiller, writing for Policy Matters Ohio, explains, “WHY THE ESTATE TAX IS GOOD FOR OHIO“:

“The estate tax makes Ohio’s tax system fairer. Lower- and middle-income Ohioans pay a greater share of their income in state and local taxes than more affluent Ohioans do. According to the Institute on Taxation and Economic Policy, Ohioans in the top 1 percent of the income spectrum pay an average of 7.8 percent of their income in state and local taxes. By contrast, the fifth of Ohio families in the middle on average pay 11.0 percent.23 The estate tax is one of the few taxes partially offsetting a tax system that falls more heavily on less affluent families. Repeal of the Ohio estate tax would accentuate income inequality, greater now than at any time since the 1920s. This tax does not cut against hard work; on the contrary, it lies at the heart of our democracy and the idea that equal opportunity must be the foundation of economic success, not inheritance of wealth.”

Schiller quotes Bill Gates Sr., writing about the federal estate tax:

“A common, and misguided, criticism of the estate tax is that individuals who work hard and save their money should be entitled to pass on the fruits of that labor to their family. I am not against working hard, saving money, or taking care of your family.
“However we must acknowledge that the person who accumulates wealth in this country was not able to do that independently. The simple fact of living in America, a country with stable markets and unparalleled opportunity fueled in part by government investment in technology and research (something my family has plenty of firsthand experience of), provide an irreplaceable foundation for success and have created a society which makes it possible for some men, women and their children to live an elegant life.
“I attended the University of Washington under the G.I. Bill, and then became a lawyer enjoying a successful career that allowed me to provide well for my family so that they in turn were able to create their own wealth. So I believe that those of us who have benefited so greatly from our country’s investment in our lives should be asked to give a portion of our wealth back to invest in opportunities for the future.”