State Republican lawmakers began last week to push a bill to eliminate Ohio’s estate tax, which is an action that could drastically affect local budgets.
The estate tax is a tax placed on assets left behind after death.
According to information from the Ohio Department of Taxation, taxation is determined by wealth.
Currently, the estates of residents with a taxable value of $338,333 or less are effectively omitted from paying the estate tax.
A 6 percent tax rate applies to any net taxable value above that mark up to $500,000. A 7 percent rate applies to any net taxable value more than $500,000.
The repeal of the tax will drastically change the way local budgets are funded.
According to Timothy Derickson, one of Butler County’s two state representatives, 80 percent of revenue from estate taxes stays in the jurisdiction in which it was collected and 20 percent goes to the state.
With approximately $280 million in estate taxes collected per year, $230 million goes to local and county governments.
Thus, the elimination of the state tax affects the local jurisdiction more than the state.
While he supports the elimination of the estate tax, his former experience as a trustee for Hanover Township and as an owner of farmland gives him perspective on both sides of the issue, Derickson said.
“As a property owner, estate tax is not a good thing,” he said. “As a township trustee, when someone passed away and the township received those funds, I saw the benefit to the township from receiving those funds. I’ve wrestled with this one, I come from it from a lot
Derickson said townships with small populations, typical of rural localities in Butler County, do not see a steady stream of income from estate taxes.
Localities receive funding from a variety of sources. Approximately 3 percent of tax revenue collected by the state is returned to local governments and sent back to local jurisdictions.
In addition, most jurisdictions have their own levies, income taxes and property taxes.
“I think I speak pretty well for most rural townships when I say that estate taxes are kind of a windfall, they’re not budgeted for,” Derickson said. “From a fiscal perspective, you don’t budget for that revenue stream. If you get it, you put it to good use.”
Derickson said he supports the estate tax repeal because assets at the time of death have already been taxed through sales, property and
“I don’t think it’s fair for families to have to pay tax on estates,” he said. “In all honesty, it’s already been taxed once. However, I do recognize that there is a downside. It can hurt local townships and municipalities.”
The proposed bill will go to committee hearings later this year.