Republicans in the Ohio House of Representatives have announced changes they want to make to the Governor's budget, including eliminating the Ohio estate tax by 2013.
Currently, Ohio taxes estates worth more than $338,333, although property transferring to a surviving spouse is exempt. But, this could change if House Republicans have their way - seeking for repeal of the estate tax by 2013.
Opponents of the estate tax claim that the 5% to 7% tax is responsible for wealthy residents leaving the state in retirement to avoid the potential cost to their heirs. Some states have more favorable estate tax rates, or none at all. For example, Florida, a popular retirement destination, has no estate tax.
The main opposition to the repeal would likely come from local governments who keep about 80% of the estate taxes collected. In 2010, the estate tax generated $230.8 million for local governments to pay down debt, fund road repairs, and other services. With the Governor's budget forcing a 33% cut in general revenue to local governments, they won't want to give up another source of revenue.
Personally, I am not opposed to a modest estate tax; and with a top rate of 7%, I consider Ohio's estate tax to be moderate. However, improvements could be made. The exemption of $338,333 is a little low. Perhaps raising the exemption and adding a portability feature, to allow a surviving spouse to utilize any unused exemption from a pre-deceased spouse, would be a welcome change. This would be more in line with recent changes to the federal estate tax.
As for an incentive to leave Ohio, I believe repealing the estate would do very little. There are plenty of other reasons to leave the state for retirement, such as the climate, which the legislature really can't change. There is also the issue of income taxes (some states don't have income taxes) which is a much higher rate of taxation than the estate tax.
Still, a repeal of the estate tax could benefit many Ohio residents... so we will have to keep an eye on the Republican efforts.