Ohio House lawmakers are considering proposed legislation that proponents say would be the largest overhaul of the state’s property tax system in half a century. However, local governments argue that it could lead to “budget shortfalls.”
Ohio House Bill 335, The Property Tax Relief NOW Act, sponsored by state Rep. David Thomas, R-Jefferson, aims to streamline Ohio’s tax landscape. It would, in part, disallow school districts from renewing emergency levies, prohibit school districts from submitting new substitute levies to voters, and authorize a county to levy an additional sales and use tax of up to 1% to fund general operations.
Proponents said it should deliver $3.5 billion in property tax relief.
“Ohio’s property taxpayers are at a tipping point,” Thomas said in prepared sponsor testimony to the Ohio House Ways and Means Committee, adding that over the past five years, Ohioans “have seen spikes in unvoted property taxes and have demanded reforms to the system.”
The lawmaker said property taxes, totaling roughly $22 billion, are the most significant tax paid by Ohioans.
“The legislature has consistently said it is a local issue,” Thomas added. “The local governments have consistently said it is a state issue.”
Thomas said the “stalemate has led to gridlock,” and although lawmakers have taken “some action” over the last five years, “the taxpayer has still been left with spikes in unvoted taxes.” Additionally, “local governments have still collected in these tax increases while bold policy change from Columbus has been unattainable,” Thomas said.
“We cannot afford to continue this,” the lawmaker added.
However, Ohio Mayors Alliance Executive Director Keary McCarthy warned of consequences should lawmakers proceed with the proposal.
“While we understand the urgency to address rising property taxes, we want to share the potentially catastrophic impacts of eliminating over $3 billion in inside millage revenue for Ohio’s schools, local law enforcement, and other essential services provided by local communities,” McCarthy said in prepared testimony to the Ohio House Ways and Means Committee.
McCarthy informed lawmakers that in 2011, the state Local Government Fund (LGF) was reduced by half, resulting in roughly $300 to $400 million annually in “lost revenue” for local communities. McCarthy, citing the Ohio Legislative Service Commission, warned that under HB 335, Ohio’s municipalities could lose over $650 million, counties could lose over $850 million, and Ohio’s schools could lose $1.9 billion each year.
“The potential for lost revenue of this scale to Ohio’s schools and local communities is staggering compared to the previous LGF cuts, and would have profound impacts on essential services in communities across Ohio,” McCarthy added.
“Inside millage funds are the foundation of local government, helping fund critical infrastructure such as fire and police services, EMS, and school districts,” McCarthy added. “In the Ohio Mayors Alliance alone, over fifteen cities would lose direct funding for their police and fire pension fund contributions—critically weakening public safety at the local level. In fact, the vast majority of cities within the coalition that utilize inside millage allocate those funds to their General Revenue Fund. This allows cities to direct the money toward necessary services—many of which support public safety.”
However, Greg R. Lawson, a research fellow at The Buckeye Institute, a free-market public policy think tank, told lawmakers the proposal is “the most significant property tax reform legislation since House Bill 920 passed in 1976.”
“Ohio’s property taxes and complex municipal income tax structure imposed the 8th highest local tax burden as a percentage of income in the nation in fiscal year 2022—up from 12th in fiscal year 2021,” Lawson said in prepared testimony to the Ohio House Ways and Means Committee. “In addition to costs and inefficiencies created by a byzantine local government system, homeowners and small businesses now routinely face unpredictable property tax spikes spurred by historic inflation levels, leading some to openly call for abolishing property taxes altogether.”
