The proposed repeal of Ohio's estate tax is unnecessary, ill-timed, and just plain wrongheaded.
Repeal would force devastating cuts to public safety, infrastructure, and quality of life in Ohio's communities. It would impose additional demands for higher local taxes to support essential public services.
It would widen Ohio's $7.7 billion budget gap at a time when vital state services are being reduced. And it would compound the effect of other cuts in state aid to local governments.
The federal government and 17 states, including Ohio, tax estates above a certain value. In Ohio, the tax is on estates of $338,000 or more. The tax does not fall on a surviving spouse, but does affect the next generation.
In the 12 months that ended in June, 2009, only about 7 percent of heirs paid the Ohio tax — some 8,000 estates in all. Many of those heirs lived outside Ohio; with an out-of-state heir, the value of the estate leaves Ohio entirely.
Estate tax revenue is vitally important to communities in every corner of the state, including northwest Ohio. In Lucas County over the past four years, communities received an average of more than $8.5 million annually from the tax for vital services.
These include police and fire protection, emergency medical services, and needed road and bridge repair. Communities in our region cannot do without these services, nor could we replace them if the estate tax were eliminated.
Many communities would face a gaping hole in their budgets. Responsible policy makers, regardless of their prior political rhetoric, need to take that into account.
Our region has been particularly hard hit by the economic downturn. In Ottawa Hills, village income-tax collections — our largest source of revenue to pay for refuse pickup, police protection, and other services — were lower last year than in any year since 2004.
Concern about our financial future has led our community to contract with the City of Toledo to provide fire protection and emergency medical services to our citizens. This is simply not the time to eliminate revenue sources.
Statewide, eliminating the estate tax would cut hundreds and perhaps thousands of jobs of police officers, firefighters and emergency medical technicians, because many communities use the estate tax to help fund their safety forces. It also would cut millions of dollars in local infrastructure improvements that are vital to job creation.
Eliminating the estate tax would force countless local property and income tax hikes to pay for state cuts. Advocates of this legislation are tax shifters, not tax cutters. In townships, where Ohio does not allow local income taxes, the property tax hit would be brutal.
The projected annual cost of estate-tax repeal would be $276 million to local communities and $70 million to the state. At this perilous time, we should not further endanger public safety, infrastructure, and economic development.
Delivering on political rhetoric in Columbus would likely result in tax increases in local communities. It could cause municipal financial instability, because increased local revenue to replace the estate tax would not be collected immediately or automatically. That's a high-risk proposition.
Our communities already face big cuts this year in state aid to local governments, and greater cuts in the future. Eliminating the estate tax on top of those reductions would be a dangerous policy, forcing impossible safety cuts and potential insolvency.
Proponents who would take credit for cutting the estate tax for 7 percent of Ohio heirs must also take responsibility for forcing voters to raise taxes on 100 percent of the residents of many communities.
Worst of all, repeal legislation is being rushed through the General Assembly without full analysis of its impact. Eliminating the estate tax now to make good on political promises would set a trap for Ohio's communities, their budgets, and our future.
This is not a tax cut. It's a shift to local taxpayers who cannot afford it. Repeal of Ohio's estate tax is not necessary. Lawmakers should abandon the effort.
Kevin M. Gilmore is mayor of the village of Ottawa Hills.