in the us its doing a piss poor job of it. In fact I'd say that a capital dominated state wants to do away with itself via privatization.

That's not how i see it. From what i see capital still needs and will need in the future the state there to be an enforcer. IMO the ultimate dead end of right wing libertarian theory is this, even when the market's hand is the least tied by the state there will be a need for a force to beat down slave riots. And that's what the state's ultimate power lies in and i don't see it privatized in the future.

So Engels is half right about that, but i'd rather say that negotiating class conflict with violence is one way the state can be used and it doesn't negate that it reproduces it's power itself. The state pulling the rug from under landlords is a good step but in this context imo it's not necessarily withering it just oversees the conflict in a different (better) way - would a tenant yeeting their landlord be arrested? Would landlords have their properties violently seized? These are all good things imo but they don't contribute to the withering of the state, only give it another role. And under communist parties - at least until they get to the point where capitalist forces aren't a threat - it's necessary to have the state as an official enforcer.