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President Bush’s plan to scrap the federal estate tax would mean lower revenue for states too, in a ripple effect that would cut tens of millions of tax dollars from every state’s budget. 

Bush’s plan would cut $50 billion a year from the federal budget after about a decade. At the same time, it would knock out some $9 billion to the states, because their tax codes piggyback the federal government’s. 

In the fiscal year that just ended, estate and inheritance taxes brought in $5.5 billion for the states. California got $900 million. Alabama received $67 million. By 2010, the figure nationally would probably reach $9 billion a year, according to the nonpartisan Center for Budget and Policy Priorities. 

“We can’t afford that kind of hit,” said Alabama House Speaker Seth Hammett, a Democrat who said lawmakers would be faced with having to pass a new estate tax or raise the revenue through other taxes and fees. 

Whether any states would be willing to create a new tax is questionable, after six solid years of state tax cuts. And the estate tax has few defenders – voters this year repealed it in Montana and South Dakota. 

“It is an unfair tax. These are assets that have been accumulated through hard work,” said Michigan Treasurer Mark Murray, who was appointed by a Republican governor. He acknowledged the state would lose money – the tax brought in $187 million this year — but said the government can absorb the loss as the cut is phased in. 

“As a public policy, we agree with it,” Murray said. 

In Michigan, estate taxes account for less than 1 percent of the total budget. Nationally, the taxes, which can vary widely each year, make up between 1 percent and 2 percent of a state’s budget on average, said Harley Duncan, executive director of the Federation of Tax Administrators. 

“That’s not chump change,” he said. 

The tax is levied on estates greater than $675,000. Nationwide in 1997, the estates of fewer than 43,000 people had to pay estate tax, out of 2.3 million who died that year, according to the center’s study. 

Former President Clinton vetoed a bill to eliminate the tax last year. He said it would threaten the nation’s financial well-being while handing the richest 3,000 families an average tax cut of $7 million apiece. 

Thirty-five states rely solely on the federal estate tax to calculate the death taxes paid to their governments, so if the federal tax were eliminated, their tax would also be lost. The remaining 15 states rely partly on the federal estate tax, but also have state estate taxes that would bring in less revenue if the federal law were eliminated, according to the center. 

Though Connecticut, New York and Louisiana are phasing out their estate tax and Montana and South Dakota repealed it, all continue to collect such revenue through a mechanism tied to the federal tax. 

State lawmakers with the National Conference of State Legislatures are studying the issue and have yet to take a stand. At a meeting last month, some wanted to lobby to keep the tax, while others wanted to let it die. 

Bush’s tax proposals, which were laid out during the campaign and introduced in Congress this week, would also affect other parts of state budgets, though none would be as sweeping as the estate tax change. 

If his plan becomes law, North Dakota, Vermont and Rhode Island would all see their income tax revenue shrink significantly because they set their taxes as a straight percentage of federal taxes, Duncan said. 

Nine states would see a slight increase in revenue, because they allow people to offset their state taxes according to the amount they paid in federal taxes, Duncan said. A cut in taxes paid to Washington would then mean slightly more taxes paid to the state. 

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On the Net: 

Center for Budget and Policy Priorities: http://www.cbpp.org 

National Conference of State Legislatures: http://www.ncsl.org 

National Governors Association: http://www.nga.org