Speaker Bill Batchelder got his letter writing campaign on over the weekend by getting a letter to the editor published in the Wall Street Journal regarding the repeal of the estate tax in Ohio. (I like to think he either hand wrote a letter and mailed it to the Wall Street Journal or sent a telegram. For some reason every time I think of him I just get a picture of Mr. Burns in my head.) Considering that the estate tax is one of the Journal’s favorite topics of conversation this whole letter must have been like cat-nip for the Journal’s readership. The idea behind the letter was to show how Ohio is leading the way nationally and showing other states that they too can get rid of the estate tax. Sadly, the letter is based in a fantasy world that only the most conservative economic thinkers inhabit and has no basis in reality.
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. Ohioans had suffered long enough with the levy on inheritances, with a 6% tax on personal and business assets above the $338,333 exemption, up to $500,000, and a 7% tax on assets above $500,000. The death tax was a major reason that business, jobs and capital have fled the state.
Ohio’s nearly 200,000 small businesses employ some 2.3 million people—about half the civilian labor force—and support annual payrolls exceeding $77 billion. But businesses and jobs have been leaving Ohio for years, many to the 28 states without a death tax…
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.
Ohhh the estate tax. Or the death tax, take your pick. This has to be one of the most misunderstood taxes out there. If you believe Republicans you would think that ever person on their death-bed is forced to sign over their entire estate to the government before they are allowed to die. As the letter is correct to point out, the only people who pay the tax are people whose estates are worth more that $338,333. So if your estate is worth $338,334 you would only pay the tax on that $1. According to the state, the tax was only administered against 7% of all estates in the last tax year. That means that 93% of people and estates never pay a single dime of estate tax. Of the 7% of the estates that do pay the tax, three-fourths of those estates are worth over $1 million. So, lets call a spade a spade here, this isn’t some sort of tax that is forcing middle class Ohioans to pay higher taxes. This is a tax that is only levied on the richest Ohioans.
What is baffling about this argument, and the letter in the Wall Street Journal, is how Republicans argue that the estate tax drives an ever-growing amount of people out of Ohio to states that don’t have estate taxes. In the same breath they will also argue that the estate tax represents a small portion of state and local tax revenue. These arguments don’t make sense though. First, even if you assumed they were both true, which they are not, why would a tax that is not collecting that much revenue be forcing people to move to other states that don’t have the tax at an ever-increasing rate? It is more likely they are moving to those states for other reasons than the estate tax, for example, the weather. What these arguments are really trying to tell us is that the estate tax effects a small portion of wealthy Ohioans and the repeal of the tax only serves to make them even wealthier.
I’m not an economist, or tax expert, but what I do know is that rich people in Ohio don’t need more tax breaks. I know no one wants to say it, so I’m just going to go and put it out there. Just look at all the tax breaks directed toward the wealthy in the budget that was just signed into law. There was the implementation of the final phase of the income tax cut, the repeal of the estate tax, Invest Ohio, and an insane tax amnesty program that stands to cost the state hundreds of millions of dollars. This is all on top of the $7 billion in yearly tax exemptions that were already on the books before this budget became law. At what point are we going to realize that the problem in this country isn’t that rich people don’t already have enough money, but that we are making rich people even richer at the expense of everyone else in society?