Estate tax repeal would result in big cuts, say some

For years, there has been lots of talk, but no action, to eliminate Ohio’s estate tax.

That could change this year with a new all-Republican state government, led by Gov.-elect John Kasich who talked during the campaign about doing away with the tax, which critics label “the death tax.”

“It’s one of those things that I think is a hindrance to keeping people in Ohio,” said repeal advocate Chris Kershner, vice president for public policy and economic development for the Dayton Area Chamber of Commerce.

House Speaker William G. Batchelder III, R-Medina, signaled on Monday that he’s in a hurry to get rid of it.

Batchelder said he plans to introduce legislation within two weeks to abolish the tax, which generated nearly $18 million in revenues for cities, villages and townships in Montgomery, Greene, Miami and Warren counties last year.

The tax is the lifeblood of some communities, said John Mahoney, deputy director of the Ohio Municipal League. In some communities, the tax “funds their police and firefighters and other basic services,” Mahoney said.

“It will cut into services and with many of our communities it will cut into capital projects,” he said.

Kettering, Montgomery County’s largest recipient with $3.2 million in receipts last year, puts nearly all the money in its capital improvement fund for buildings, roadway and infrastructure. The city also uses the money to match federal grants.

Centerville City Manager Greg Horn said the amount his city receives from the tax varies from a low of $800,000 a year to about $1.6 million last year. The money helps pay for the city’s day-to-day operations, including the police department, he said.

“It would be a huge hit,” said Horn. “I don’t know what we would do.”

And with state officials threatening to cut the Local Government Fund to balance Ohio’s budget, officials in cash-strapped communities wonder how legislators could even consider stripping them of an important revenue source.

“It’s easy for the state to decide to give up money that is primarily going to someone else — local governments,” said Dayton City Manager Tim Riordan of the tax that has brought the city an average of $1 million annually during the last five years.

For some communities, one or two large estates can bring a revenue windfall.

For others, particularly wealthy ones like Oakwood, the tax is a regular source of income that allows them to avoid increasing other taxes. That city’s $13.5 million budget would take a major hit if the state eliminates the tax, which brought in $1.8 million last year, said City Manager Norbert Klopsch.

The tax is levied on estates worth more than $338,333. The current tax is 6 percent on estates worth between $338,333 and $500,000 and 7 percent on states with values more than $500,000.

About 6.9 percent of estates were subject to the tax, according to a 2007 Ohio Department of Taxation study comparing Ohio Department of Health data on deaths to the number of taxable estates.

In the fiscal year that ended June 30, the tax generated a total of $285.8 million, with $55 million going to the state and $230.8 million going to the local communities where the person who died had lived.

The Greater Dayton Mayors and Managers Association is likely to oppose repeal of the tax, said Michael Ratcliff, executive director.

“If the estate tax goes, local government has to raise taxes,” said Ratcliff. “The fact is there is a cost to providing services.”

Ratcliff said the state could give local governments some financial relief by reforming public pension system funding, eliminating prevailing wage requirements for government construction projects and ending binding arbitration for public safety unions.

Matt Mayer, president of the Buckeye Institute for Public Policy Solutions, a Columbus-based conservative research group, said there needs to be a “summit of Ohio tax authorities,” including cities, villages, school districts and other entities.

The goal would be lowering the overall cost of government, Mayer said.

“We have to have a structural reform conversation,” said Mayer.

Amy Hanauer, executive director of Policy Matters Ohio, a left-leaning Cleveland-based research group, said there’s a place for the estate tax.

“People can inherit plenty of money ... and at the same time we can pay for a lot of important services with a reasonable tax on estates,” Hanauer said.

“I think frankly what our state officials need to be careful about is that they spend the time to fully understand and recognize the impact of what they do,” said Klopsch.

Staff writer Jill Kelley contributed to this report.