Public services provided by state governments help some families accumulate great wealth, and Ohio has recognized this for a century by levying an estate tax on well-off residents. This tradition may soon come to an end, as Governor John Kasich has promised to sign legislation repealing Ohio's estate tax if it's included in the General Assembly's final budget.
Last month, Ohio’s House of Representatives voted to repeal the tax, and this week the Senate included the repeal in its revamped budget proposal.
Since the vast majority of Ohio’s estate tax revenue (80 percent) goes directly to local governments, eliminating this tax would mean a loss of more than $200 million annually for local coffers.
Opponents of the estate tax repeal have argued that the scope of the revenue loss at the local level will lead to deep cuts in services, local tax increases, and lowered bond ratings.
Supporters of the repeal claim that the estate tax harms middle class families, but the numbers tell a different story.
Each year, less than 10 percent of all decedents' estates in Ohio are subject to the tax. In fiscal year 2010, a quarter of the estates taxed had values of more than $1 million and paid more than 75 percent of the total estate tax collected in the state.
Furthermore, even though Ohio’s estate tax threshold is relatively low compared to other states, the tax rates are also low, particularly for large estates.
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.