GOP proposals take aim at estate tax

The governor opposes cutting or eliminating the tax.
COLUMBUS (AP) -- House Republican leaders said Wednesday they will push to either cut or eliminate Ohio's estate tax, which they believe is driving residents to other states for retirement.
The tax is levied on estates valued over 338,333 at the time of a person's death and before the property -- real estate, stocks, automobiles or other tangible goods -- is distributed to heirs. If the estate is transferred to a spouse, no tax is due.
Republicans said doing away with the estate tax is the next step in their plan to reform Ohio's tax code.
"This sends a strong message that we want people to earn, live and invest in Ohio," said House Speaker Jon Husted, R-Kettering.
The estate tax raised 273 million in fiscal year 2006. Under a state formula, 80 percent, or 219 million, was dispersed to local governments and 20 percent, or 54 million, stayed with the state.
Gov. Ted Strickland, a Democrat who is drafting his first two-year budget proposal, opposes the idea of cutting or eliminating the estate tax given Ohio's tight fiscal environment, spokesman Keith Dailey said.
Strickland said last month that growth in tax revenues will not meet expectations, leaving budget planners with between 1 billion and 1.5 billion less than projected to spend on government programs.
Announcement
In announcing their plan to do away with the estate tax, Republicans did not provide data showing that the tax is driving retirees out of the state.
"We want to make Ohio competitive and remove any burden that might inhibit people from living here," said Karen Tabor, a spokesman for Husted.
About 7,700 estates were subject to the tax in fiscal year 2006, up slightly from 7,500 the year before, according to the Ohio Department of Taxation.
Property owned by Ohio residents that is located outside the state is not subject to the tax, nor are qualified working farms -- those that have been in operation for the previous three years, said Gary Gudmundson, a spokesman with the taxation department.
Tax rates vary, depending on the value of the estate.
For property valued between 338,333 and 500,000, the tax is 13,900 plus 6 percent of every dollar over 338,333. If the estate is valued over 500,000, the tax is 23,600 plus 7 percent of every dollar over 500,000.
Two proposals
Republicans expect to introduce two proposals in the coming days, Husted said.
A proposal from Rep. Bob Latta, R-Bowling Green, would eliminate the state's cut of the estate tax. Any local municipality wishing to continue receiving its share of the tax revenue would need voter approval to renew it. In addition, the proposal would exempt estates valued at or below 600,000 by 2010.
Republican Rep. Larry Wolpert of Columbus has a competing proposal. His bill would force the state to give its portion of the estate tax to local governments and also allow municipalities to decide whether they want to opt out of their defined share. He would also raise the threshold of liability to 362,000.
Ohio last made major changes to its estate tax in 2000, when former Gov. Bob Taft, a Republican, signed a bill raising tax credits on estates and setting the current exemption levels.
Those changes, along with a sluggish stock market, have caused revenues to drop over the years, said John Mahoney, deputy director of the Ohio Municipal League, which represents local governments.
Cities don't rely on the money for overall operating expenses, he said. Rather, the money is used to help pay for one-time expenditures, such as building improvements or new parks, Mahoney said.
Mahoney said the municipal league will withhold judgment on the Republican proposals until more details are offered.