COLUMBUS - House Republicans yesterday said they will pursue elimination of Ohio's estate tax at a time when Democratic Gov. Ted Strickland is warning that the state's revenue picture is worse than originally thought.
The state has whittled away at its share of the tax over the years by gradually raising the threshold for the size of estates subject to it. Elimination of the last remaining piece on estates valued over $338,333 would cost the state about $60 million a year.
Mr. Husted said the chamber will also consider forbidding local governments from collecting their 80 percent slice of the so-called "death tax," an estimated $240 million, after 2008 unless they get voter approval.
"This sends a strong message that we want people to earn, live, and invest in Ohio," said House Speaker Jon Husted (R., Kettering). "It removes another disincentive from our tax code that is forcing people to leave our state."
Just two states, Florida and Virginia, have no estate tax.
Mr. Strickland will submit his first two-year budget proposal to lawmakers on March 15, and it will not include an estate-tax cut, said spokesman Keith Dailey. Mr. Strickland has painted a less-than-rosy picture of the state's revenue estimates as he has downplayed expectations for major new spending initiatives.
"We've got a very tight budget. The more I find out about the circumstances facing us, the more serious I recognize our situation to be," he said Tuesday.
The House is considering two possible routes, but either one would cost the state $60 million a year.
Rep. Bob Latta (R., Bowling Green) will introduce a bill to eliminate the state share of the tax.
If local governments continue to pursue their share after getting voter approval, this bill would cut into their bottom lines by dramatically raising the threshold of estates subjected to it to $600,000 by 2010.
"When citizens work their entire lives and pay taxes on their hard life's labor, they should not have to pay taxes on those same assets...," said Mr. Latta.
Rep. Larry Wolpert (R., Hilliard) plans to introduce a more modest alternative retaining the tax but giving the state's 20 percent share, $60 million, to local governments while raising the estate value threshold to $362,000, a figure that would rise annually with inflation.
John Mahoney, spokesman for the Ohio Municipal League, said local governments are taking a wait-and-see attitude.
"Our concern with the estate tax has not been whether it's a good or bad tax, but that cities, villages, and townships have relied on this revenue source for decades," he said.
"If the state makes the decision to get out of the business of taxing estates, there should be some way of making up the revenue.
"Part of the problem is that it doesn't uniformly affect cities," he said. "Cincinnati is smaller than Columbus, but it collects twice as much as Columbus. It's a big revenue source for them, but less so for places like Toledo and Columbus."
Toledo Finance Director John Sherburne said the city expects $4 million from the estate tax this year to go toward its $235 million budget.
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