The new Ohio budget signed into law by Governor Kasich on Thursday repeals
Ohio's estate tax
, effective January 1, 2013. (The current
Ohio estate tax imposes a 6% rate on estates of $338,333, rising to 7% on estates over $500,000.) Twenty-two states (plus the District of Columbia) currently impose an estate tax or an inheritance tax (Maryland and New Jersey have both). See Forbes, Where Not to Die in 2011
Hover over each state for 2011 estate tax exemption amount and top rate
For different perspectives on the Ohio estate tax repeal, see End Ohio's Estate Tax and Ohio Digs its Budget Hole Deeper. (Hat Tip: Matthew Hochstetler.)
Update: Wall Street Journal op-ed, Ohio Shows the Way on Death Tax Repeal, by Bill Batchelder (Speaker, Ohio House of Representatives), Jack Boyle (Co-founder, Citizens United to End Ohio's Estate Tax) & Dick Patten (President, American Family Business Institute):
The end of the death tax, which goes into effect on Jan. 1, 2013, will help stop the hemorrhaging of small businesses and jobs from the Buckeye State. ... While some opponents of repeal defend the death tax on the grounds that the state, like the federal government, needs the revenue, the truth is it yielded little revenue—around 2% of the average local jurisdiction's revenues in Ohio, less than two-tenths of 1% for Columbus, and around 1% for Washington.
What estate taxes do produce is flight. Business owners flee high-tax states for low-tax or no-tax states, and wealthy people dodge the entire matter by hiring expensive lawyers who establish trusts, foundations and other devices that protect them from the tax man. ...
A 2008 study by the Connecticut Department of Revenue Services, for example, named the estate tax the primary reason wealthy residents left the state and, in many cases, took their businesses with them. The study also showed, if further confirmation were needed, that the economies of states without estate taxes grew 50% faster, and created nearly twice as many jobs, than states with death taxes. ...
What most of the critics don't understand is that repeal of the estate tax ultimately means more tax dollars, not fewer. A 2009 Duquesne University study found that state and local governments lost some $3 in non-estate tax revenues for every $1 increase in federal estate tax revenue. Overall, the study calculated, eliminating the federal estate tax would boost state and local tax revenues by approximately $9.3 billion annually. With Ohio business owners now able to focus their energy and resources on growth and success, rather than on the survival of their businesses after they die, we can expect them to invest more money in those 200,000 businesses, hire more workers, and increase purchases—all of which will help increase the tax base.
Ohio's repeal of its estate tax, after nearly 120 years, may not lead to an avalanche of repeal activities around the country, but it's already having a positive effect. Last month, for example, Maine lawmakers doubled their estate tax exemption to $2 million from $1 million. Oregon lawmakers rejected a proposal to increase their estate tax, as did North Carolina. Momentum is moving in the right direction.
State governments may need tax revenue, but they don't need taxes that destroy wealth and drive away job-creating business owners.