Testimony Before the House Ways and Means Committee
Ohio Estate or "Death" Tax Repeal/Reduction
127th Ohio General Assembly
Proponent Testimony
Ty R. Pine
State Legislative Director
NFIB/Ohio
Mr. Chairman and members of the House Ways and Means Committee, my name is Ty Pine and I am here on behalf of the 25,000 governing members of the Ohio Chapter of the National Federation of Independent Business to provide proponent testimony in support of a reduction or elimination of the Ohio estate or "death" tax. I want to thank you in advance for your commitment and sensitivity to small-business issues.
NFIB/Ohio is the state's largest small-business advocacy organization dedicated exclusively to representing the interests of independent business owners. Our membership spans the spectrum of the business community, ranging from sole proprietorships to substantial, independently held enterprises. The typical NFIB member employs fewer than 10 workers and grosses less than $450,000 in annual sales.
I want to provide this committee with NFIB's perspective on Ohio's estate or "death" tax, and the effects this tax has on small and medium-sized employers. As an organization, NFIB has consistently advocated at the state and federal level for complete elimination of the death tax and/or a small-business exemption. Annually, NFIB members are asked to weigh in on pending public policy issues via a Member Ballot process. Our members' responses to the ballots determine NFIB's position on all public policy issues. The 2007 NFIB/Ohio Member Ballot featured a question specifically related to the death tax (see below).
Should NFIB/Ohio support legislation to reduce and/or eliminate Ohio's estate tax?
Yes: 93.51%
No: 4.17%
Undecided: 2.32%
Background: The death tax is levied at both the federal and state levels on the value of a person's estate when it is passed on to an heir. Ohio is one of only a few states that levy a death tax above and beyond the federal state estate tax credit. Currently, the Ohio death tax is levied against estates valued at $383,333 or more (this includes the value of the deceased's home, retirement plans, life insurance policies, etc.). Estates valued between $338,333 and $500,000 are currently charged $13,900 plus 6 percent of the excess over $338,333. Estates valued over $500,000 are currently charged $23,600 plus 7 percent of the excess over $500,000.
Legislative proposals seeking to reduce or eliminate Ohio's death tax have already emerged in the 127th General Assembly. The plans currently being discussed feature three main objectives: eliminating the state's share of the death tax revenue (which is currently 20 percent of the total collected), raising the dollar threshold at which the death tax would apply meaning that fewer estates would be subject to the tax, and providing local governments with options to eliminate the death tax in their area if they so choose.
Proponents argue that the death tax is inherently unfair as Ohioans already paid taxes on their accumulated assets through sales, income and property taxes. In addition, many business owners spend a tremendous amount of time and money on tax planning and preparation in order to ensure that their business and estate will remain intact after they pass. These planning fees are on top of the cost of the death tax itself adding to the burden that Ohioans already face. Proponents also argue that any loss in tax revenue from the elimination of the death tax would be offset by the number of family businesses that would be able to remain open and operational as they are passed from one generation to another.
Opponents argue that local and state governments need the tax revenue that the death tax generates (this amount averages roughly $315 million per year for Ohio). They argue that revenue generated from the death tax constitutes a significant portion of their overall funding that is necessary to support government services and programs. They also argue that the tax is a small amount to levy against sizeable estates that can afford the cost and that to eliminate it would constitute a tax break for the rich.
In addition to the Member Ballot, we also surveyed our members to better gauge the impact of the estate tax. While a copy of the survey and results is attached, I want to highlight a few areas. Per the survey results, 64 percent of respondents indicated it was of critical concern; over 40 percent of respondents have purchased insurance products or hired the services of a financial planner to help defray the cost of the estate tax; 61 percent indicated they had hired the services of an attorney; and, 61 percent indicated that the death tax will play a role in determining where they retire; and, 82 percent of respondents support local and state charitable causes. As the death tax pushes Ohioans out, we not only lose the tax revenue, leadership, and entrepreneurial spirit of these individuals, but we also lose their charitable giving.
The estate tax can be devastating to multi-generational family businesses. While these companies have paid numerous taxes, such as income tax, tangible personal property tax, real property tax and sales tax on the assets in their business, the Ohio estate tax levies an additional tax penalty against their assets accumulated over a lifetime. Those with enough foresight and means to establish a succession plan spend untold thousands of dollars on insurance products and planning and legal services. Those same dollars could be re-invested in new equipment, creating new jobs, or providing employee benefits.
While our members are supportive of a full repeal, the principles contained in House Bill 3 and House Bill 4 would be a major step forward. On behalf of our members we respectfully ask you to support legislation that accomplishes two things:
- Link Ohio's minimum threshold to the federal exemption. At $338,333, more and more family businesses are accumulating assets that qualify them to pay the estate tax. A higher threshold helps alleviate the competitive disadvantage of the estate tax and harmonizes Ohio law with federal law.
- Allocate 100 percent of the remaining tax receipts to local governments.
Mr. Chairman, thank you for the opportunity to share NFIB's perspective on the Ohio estate tax. Ohio's small-business owners thank you for your thoughtful deliberation on this matter. I would be happy to answer any questions.
