Property Tax Issue Information
To be clear, this article is meant only to inform you as a township official and a voter, not to influence your position or possible future vote on this issue.
In Ohio a petition is being circulated by the Committee to Abolish Ohio Property Taxes (https://axohtax.com/) to put a constitutional amendment on the ballot to completely eliminate property taxes. If this issue were to pass, what changes would need to be made to fund public schools, emergency services, townships, and other services currently funded by property taxes? Or might some or all of these services not get funded and disappear?
No Alternatives for the Services Currently Funded by Property Taxes - It is important to understand that this petition, if passed, does not provide for solutions regarding funding for schools, emergency services, etc. This committee is interested in eliminating all Ohio property taxes, period.
Funding Alternatives Report: Post-Property Tax Ohio - The elimination of all property taxes in Ohio, as proposed by a constitutional amendment petition, would remove a major funding source—estimated at over $20 billion annually—that is the backbone of local government and school finance. Replacing this revenue would require substantial changes to the state's tax structure, shifting the funding burden to other statewide or local tax sources.
Here are possible ways to fund public schools, emergency services, townships, and other essential services without property taxes:
Funding Public Schools - Property taxes for public schools currently account for approximately 60% of all property tax revenue in Ohio, making the elimination a critical challenge for education funding. Ohio's constitutional mandate to "secure a thorough and efficient system of common schools" would compel the General Assembly to find one or more replacement tax and/or fee sources or to also remove this mandate from the Ohio constitution.
Suggested Alternatives
- Significant Increase in Statewide Sales Tax: This is a frequently discussed alternative. A major increase in the state's sales tax rate would generate substantial revenue. This revenue would then be centralized at the state level and redistributed to school districts using a modified version of the current Fair School Funding Plan (FSFP).
- Example: One legislative proposal suggested a 1.75% sales tax increase combined -with a statewide property tax for education. (Please note - To replace the entire loss, the increase would need to be much higher, potentially raising the total sales tax rate significantly.)
- Pros: Broadens the tax base to include non-residents (tourists, interstate commerce).
- Cons: Regressive tax that disproportionately affects lower-income households unless essential goods are exempted. (Of course, the rate would need to be higher if substantial exemptions are included.)
- Statewide Education Income Tax Surcharge: Implementing a new, dedicated, statewide income tax surcharge specifically earmarked for education. This could be structured as a flat tax or a progressive tax.
- Pros: Generally considered more progressive than a sales tax.
- Cons: Places the entire burden on residents' incomes, making Ohio less competitive in income tax rates compared to other states. This could have a very substantial impact on businesses considering moving to or remaining in Ohio.
- Statewide Property Tax (Limited): While the amendment aims to eliminate all property taxes, a separate legislative action might be needed to institute a low-rate, uniform statewide property tax strictly for education that is exempt from the constitutional amendment (if legally possible, which would be subject to court challenges).
Funding Emergency Services (Fire, EMS, Police) & Townships - Ohio townships, which serve approximately 35% of the state's population and are heavily reliant on property taxes for essential services like fire, EMS, road maintenance, and local police protection, would face the most severe immediate financial crisis.
Suggested Alternatives
- Expanded Local Option Income Taxes (LOT): Granting local governments (counties, townships, and municipalities) the authority to levy voter-approved local income taxes for specific purposes, such as an "Emergency Services Income Tax" or a "Road and Bridge Income Tax."
- Current Law Change Needed: State law would need to be changed to allow townships to place income tax levies on the ballot or pass them directly through a vote of their board of trustees, as this is currently not a primary funding option for most townships.
- Local Option Sales Tax Increase: Increasing the county-level sales tax cap and allowing counties to dedicate new sales tax revenue specifically to a local government distribution fund. This fund would then be allocated to townships and municipalities for essential services.
- Current Law Constraint: The current total combined state and local sales tax rate is limited, which would require a legislative change to raise or eliminate this cap.
- Increased State Local Government Fund (LGF): Significantly increasing the allocation to the State Local Government Fund (LGF) from the state's General Revenue Fund (GRF). The formula for distributing LGF monies to counties and local subdivisions would need to be completely restructured to fill the massive funding gap.
- Dedicated Excise Taxes and Fees:
- Increased Motor Vehicle License Fees: Allowing townships to increase the local add-on to motor vehicle license plate fees beyond the current cap to fund road and bridge maintenance.
- Expanded Lodging Taxes: Allowing local governments to increase or add a dedicated portion of lodging (hotel) excise tax for local general fund purposes.
- New Public Safety Service Fees: Implementing user or readiness fees for specific services, such as a fire service fee per structure, though this would mimic a tax and could be politically unpopular and have an adverse effect on insurance premiums.
Funding Other Local Services (County, Library, Parks)
County governments, cemeteries, libraries, and park districts also rely heavily on property tax levies.
Suggested Alternatives
- Dedicated Local Income Tax Levies: Allowing county commissioners and other local taxing authorities (such as cemetery, library or park boards) to place dedicated, county-wide income tax levies on the ballot to replace lost property tax revenue for their specific operations.
- Fee-Based Revenue Enhancement: For services like parks, exploring increased use of entrance fees, rental fees, and special activity charges. For certain county services, increasing administrative or permitting fees to a level that fully covers the cost of the service.
- State Block Grants: The state could provide a system of per-capita or block grants to counties and libraries, replacing their former property tax revenue with guaranteed state funds, funded by the overarching statewide tax increase (sales or income).
This analysis suggests that the elimination of property taxes would require a shift to a highly centralized state funding system for schools and a significant expansion of local income and/or sales tax authority for other essential services. The overall effect would be a massive increase in either the state sales tax, state income tax, or a combination of both. As stated, it would also mean the elimination of local control over the disbursement of state collected taxes.
To see a discussion about the impact of property tax on local education funding, you can watch this video: Ohio school board CEO talks property tax, impact on schools.