“Estate tax repeal should be a no-brainer: More family businesses and farms growing in size. More jobs. More tax revenues.” Dick Patten, president American Family Business Foundation.
For centuries, economists have pointed out the harmful economic effects of estate and inheritance taxes.
Excerpts from the book Rich States, Poor States (by Laffer, Moore, Williams, 2009) explain the harm:
“Many studies indicate that the death tax is so inefficient, so adverse to saving and capital investment, and so complicated, that the states and the federal government would actually recoup much if not all revenues lost from this tax with higher tax receipts resulting from long term economic growth.
“The estate tax causes distortions in household decision making about work effort, saving and investment (and the loss of economic efficiency) that are even greater in size than those from other taxes on income from capital.”
State level estate taxes are especially harmful because people and businesses move to avoid them. A study by Connecticut’s treasury office found that over half of tax planners reported the main reason their wealthy clients left Connecticut was the state’s estate tax.
As of January 1, 2010 (based on current state law), 30 states will have no estate or inheritance taxes. Common sense shouts out the simple truth: Ohio’s estate tax creates an incentive for people and businesses to leave the state or never come to Ohio in the first place.
Ohio has by far the lowest estate tax exemption in the United States—only the first $338,333 of the taxable estate is exempt from Ohio’s estate tax. This compares to an average exemption amount of about $1,700,000 for the other states that have estate taxes. Ohio’s estate tax takes direct aim at the middle class—homeowners, family businesses, and farmers.
Small business owners and farmers are often asset rich, but cash poor—with most of their net worth in hard assets such as buildings and land. Upon the death of the owner, the family may be forced to sell a portion of the business or farm to pay the estate tax. The estate tax inflicts unnecessary financial and emotional burdens on families.