State legislators have introduced a bill to eliminate the state estate tax, and local governments are preparing for anticipated cuts.
The Ohio estate tax was established in 1893, and the current law applies to estates valued at more than $338,333. Proposed House Bill 3 states that the estate tax would apply to people dying on or after July 1, 1968, and before Jan. 1, 2011. The bill was introduced Jan. 11 and assigned to the Ways and Means Committee.
The two primary sponsors of the bill are Republicans Cheryl L. Grossman of Grove City and Jay Hottinger of Newark, who had a press conference about the bill Wednesday.
“There are hard-working Ohioans that have paid taxes throughout their careers and assembled a little bit of property, business or farm that they want to pass on to the next generation. I really believe this is double taxation,” Grossman said, noting only 17 states have an estate tax.
Local governments handle the estate tax differently: Some include it in budget revenue projections, others use it only for capital improvements. All local governments, however, say they will lose out on funding that is sorely needed.
Youngstown and Boardman Township have projected $600,000 in estate taxes for 2011.
Last year, the city received $936,564 from the estate tax, said Kyle L. Miasek, Youngstown’s deputy director of finance.
The estate tax is put in the general fund, and it’s “all lumped together and isn’t dedicated for any particular purpose,” he said.
“I’m building a budget based on what is current law and that can change. ... If [the bill] does pass, we will have to curtail expenses,” Miasek said.
Boardman Township budgeted $600,000 in revenue from the estate tax for 2011. On average, the township receives about $900,000 annually, said Trustee Brad Calhoun.
“We understand what the state’s trying to accomplish, but we’re saying don’t turn the spigot off all at once, so to speak,” said Trustee Thomas Costello, referring to the loss of estate tax revenue and cuts in the local government fund.
Current law splits the estate- tax revenue, with 20 percent going to the state and 80 percent to the township or municipality of residence at the time of death, according to a release from the Ohio Township Association.
In 2009, 110,000 Ohioans died and about 8,000 estates, or 7 percent, qualified for the tax, according to the Ohio Department of Taxation.
Poland Township stands to lose about $120,000 with the loss of the estate tax, said fiscal officer Joseph Granitto. The township received $99,000 last year.
Granitto said he didn’t start including the estate tax in the projected budget until two years ago, after township officials asked why an annual sum wasn’t in the projected revenues.
“It’s hard to budget for someone dying,” quipped Poland Township Administrator Jim Scharville.
“We never used it for operating expenses, it was always in capital improvements,” Scharville said.
Poland village does not include the estate tax in the budget, said Linda Srnec, clerk-treasurer.
“There have been years that we have substantial amounts and some years very little, and that’s why we don’t budget for it,” she said, noting the village received $55,000 in estate tax in 2009 and more than $128,000 in 2010.
Canfield Township fiscal officer Carmen Heasley said she does not include the estate tax in the budget. In 2010, the township received $255,875 from the tax.
Although the township does not have an official policy, the estate tax is considered a “rainy day fund” and has been used for capital improvements, such as paving Gibson Road and constructing a building at the township park, she said.
Canfield city does typically budget about $100,000 in anticipated revenue from the estate tax, said Joe Warino, city manager.
He added that 2010 was an unusually high year, with close to $400,000 brought in from the tax. The city, like the township, uses the money primarily for capital expenses.
Last year, Austintown Township also received higher than usual amounts from the estate tax — $637,585, said Administrator Michael Dockry.
The township usually budgets for $250,000 annually, said Michael Kurish, fiscal officer.
“The state is obvious in financial crisis of their own that they need to get out of and are doing so by constantly looking at local government funds,” Kurish said.
“We’re looking at a shift of responsibility of paying coming to the residents. They’ll have to make it up in additional taxes or a reduction of services,” he continued. “Either way, it will benefit the state, but not really benefit the local communities.”