Policy Documents

Ohio Buries Death Tax, Cuts Property and Income Taxes

Nick Baker –
July 18, 2011

Tax-cut crusaders achieved a monumental goal this summer when Ohio Gov. John Kasich (R) signed into law the new $55 billion biennial state budget, which includes a total repeal of the estate tax.

The estate tax repeal goes into effect Jan. 1, 2013. Ohio is one of 22 states and the District of Columbia that have an estate or inheritance tax.

Kasich signed the budget June 30 after he and lawmakers crafted a spending plan that not only closed the state’s nearly $7.7 billion deficit but also cut property and income taxes, reduced spending, and privatized some state agencies.

‘Had to Make Choices’
“We've tried in this budget to make the best of a very difficult economic environment,” said State Sen. Chris Widener (R-Springfield), chairman of the Senate Finance Committee. “We simply don't have the resources to sustain an endless growth in government spending, so we had to make choices about our priorities.

“This budget directs the limited resources we have to those in need and to Ohio's schools and local communities. We've also taken steps to help families keep more of their hard-earned money through responsible tax relief,” he said.

Local Officials Express Anger
Ohio’s estate tax, which has been in effect in one form or another since 1893, has two rates: 6 percent for estates between $338,000 and $500,000, and 7 percent for estates worth more than $500,000. According to the Ohio Department of Taxation, the estate tax brought in nearly $334 million in 2009. Of that amount, 20 percent went into state coffers. The remaining 80 percent was directed to local governments.

Abolishing the estate tax has been met with anger from local officials who say losing that revenue source will force them to cut services. However, Kasich said local governments need to learn to do with less.

“There isn’t a local government I know of in this state that can't be far more efficient. They need to change the way they do business,” he said.

Farmers Welcome Repeal
News of the estate tax repeal was welcomed by the Ohio farming community, which has traditionally been hit hard when farmers leave their farms to their families when they die.

“The American dream includes working hard, investing wisely, and spending sensibly so that we can pass on something to our children,” said Jack Fisher, executive vice president of the Ohio Farm Bureau Federation. “Our homes, farms, businesses and other assets have already been taxed, which is why the farm bureau felt taxing them again upon the owner’s death was extremely unfair.”

Dick Patten, president of the American Family Business Institute, said, “By repealing this suffocating tax, Gov. Kasich and the Ohio Legislature have made their state stronger and made it a model for the remaining 21 other states that continue to impose state estate or inheritance taxes, including three of Ohio’s neighbors: Indiana, Kentucky, and Pennsylvania.”

Maine Rolls Back Tax
Ohio isn’t the only state that is taking on the death tax. In a budget signed in June, Maine Gov. Paul LePage (R) doubled the exemption from $1 million to $2 million, which will be effective Jan. 1, 2013.

According to Maine Department of Revenue Services estimates, this means in 2013 approximately 150 to 175 estates will be taxed in Maine and 400 estates will be exempt from the tax because of the higher threshold.

LePage said in a statement, “While this move is a step in the right direction, unfortunately it falls short of full repeal that is needed to lighten the heavy tax burden on Maine’s small businesses.”

Recently, lawmakers in Oregon and North Carolina rejected proposals to increase the estate tax.

‘Government Has to Cut’
In Ohio, local officials are coming to terms with the prospect of less taxpayer money flowing their way. Oregon City, a suburb of Toledo with a population of more than 20,000 residents, stands to lose $1 million over the next three years.

Oregon City Administrator Mike Beazley said, “Our families have had to cut back, our businesses have had to cut back, and government has to cut back.”

Nick Baker (nhbaker2006@gmail.com) writes from Washington, DC.