In wake of property value hikes, legislature gets to work on tax reform

‘This is going to be some serious excavating and understanding and autopsy of Ohio’s tax system,’ representative says.

Credit: Nick Graham

Credit: Nick Graham

Members of the special legislative committee tasked with taking a deep dive into property tax reform say everything, including an idea tying taxes to income, will be on the table when they get to work next year.

When the biennial budget passed last summer it created a Joint Committee on Property Tax Review and Reform. Senate Ways and Means Committee Chairman Bill Blessing and House Ways and Means Committee Chair Bill Roemer are co-chairs and there are two other Republicans and two Democrats from each chamber.

Blessing told the Journal-News he imagines they will have their first committee meeting in January and there will be multiple meetings thereafter. They have until Dec. 31, 2024 to come up with recommendations.

“I think it’ll be everything on the table. I don’t think it would be just stick to esoteric tweak this tweak that...,” Blessing said. “As a practical matter it’s going to be very difficult to just say focus on only the mechanics of property valuation in the state of Ohio, don’t focus on existing legislation or legislation that may be introduced, those sorts of things are going to come up. To me pretty much everything is going to be on the table.”

The problems with the property tax system in the state have been festering for a long time, but really came to a head this year when property value hikes mandated by the state tax commissioner topped 40% in some areas.

Rep. Daniel Troy, a Democrat from Willowick is on the new committee.

“We’ve got to roll up our sleeves and decide listen we’re going to have to plow into this, this is going to be some serious excavating and understanding and autopsy of Ohio’s tax system,” Troy told the Journal-News. “I’m so concerned we’ll do this light heartedly and just kick this can down the road for another 20 years . What we’re hearing is these property taxes are killing me and they’re getting out of hand.”

Butler County Auditor Nancy Nix sounded the alarm in March that average property values could skyrocket 24% and by May that number had exploded to 42%, the final median increase now stands at 37% for the county. The pandemic — among other issues — shoved home prices to bloated levels and the state was relying only on 2022 sales.

After Commissioner Don Dixon issued a call to action last spring, Rep. Thomas Hall, R-Madison Twp. and West Chester Twp. Republican Sen. George Lang introduced HB 187 and SB 153 as a “Band-Aid” measure to “stop the bleeding” in the short term while the legislature works on a more comprehensive solution to perceived flaws in the property taxation system.

The Band-Aid was to mandate a three-year average approach which would bring the average increase to around 25% here. HB 187 passed the house but now the senate — at Blessing’s urging — appears ready to switch course in favor of a universal Homestead exemption.

A ‘circuit breaker’ proposal

A new idea has been proposed by Policy Matter Ohio that’s called a “circuit breaker” approach to property taxation. Here’s how they explain it:

“Property tax reductions must be aimed specifically and only at those who truly need them. That’s exactly what a circuit breaker does, targeting those who are paying an outsized share of their income in property taxes. The typical circuit breaker mechanism works like this: A qualifying household pays property taxes up to a threshold percentage of income. If the household’s property tax bill exceeds this limit, the state picks up all or a portion of the tax payments made above it.”

Ohio’s neighbor to the north uses this approach. Ron Leix, deputy public information officer, for the Michigan Department of Treasury, said for tax year 2021, just over one million taxpayers claimed the property tax credit. The credit total was more than $750 million, for an average credit of $698.

Zach Schiller, research director for Policy Matter Ohio, told the Journal-News the state can configure a program in whatever way they see fit and he hopes the committee will vet it.

“I see it as the most targeted and most effective form of property tax relief,” Schiller said. “And one that is quite common across the country. This is not some bizarre new scheme, this is something that’s been in place for many, many years in states of all kinds of political complexions.”

Blessing said he’s agree to letting Schiller present the idea to the committee. He said there isn’t a firm handle yet on what it could cost here — Ohio is larger than Michigan by nearly two million people — but it’ll be pricey. Blessing said he fears this solution would be “inflationary” which he said was the same problem with the three-year average idea.

“In this case when you’re going to dump this much money into the system to drop property tax increases it really does operate the same way as having a lower interest rate and that pushes home prices up,” Blessing said. “It would be inflationary, so not only are you spending a lot of money on this but you’re spending a lot of money to indirectly push home prices up which kind of exacerbates the problem.”

Lang is also on the tax reform committee and he predicts the circuit breaker would be “dead on arrival.” He plans to push for reforms for everyone, “I would like to see us put some very, very strong restrictions on how much a tax can go up in perpetuity.”

“I really want to look at limiting the amount your taxes can go up to no more than CPI,” Lang said. “Now if you want to say CPI plus a factor for growth index so that for example a school district whose population is growing , they should be treated a little different than those in decline. By population I mean the enrollment of the school district.”

Troy, who was a vocal opponent of the three-year average during the hearing process, said they ought to be targeting the needy.

“Not to make light of the fact that no matter how much you make you don’t want to see a huge increase overnight in property taxes, but I think we really need to concentrate on those that really have to make some life changing decisions on what they can afford....,” Troy said. “They always say if you give a general tax cut you give the rich guy a banquet and you give the poor man one meal.”

Other issues the committee will likely tackle are the overuse of property tax abatements that shrink the tax base paying for government services and can prompt more levies. Blessing wants to “get rid of all the incentives we give to a lot of these housing investors to basically drive them out.” And people have also discussed tinkering with the 20-mill floor aspect of school funding among other ideas.

Ohio law provides special protection for school funding. It provides a minimum millage level for school districts that rates cannot fall below. Once a district’s total current expense millage is reduced to 20 mills, it cannot be reduced any further, so tax revenues grow as property values increase.

Blessing said this won’t be easy because some things like inside mills are in the constitution and not subject to tax reduction factors.

“There’s a mix of policy and constitutional language that’s not going to make for easy reform on this,” he said. “We can’t just do a broad-based piece of legislation if it runs afoul of some of these constitutional provisions.”

The County Auditor’s Association of Ohio has been in the thick of things from the start, as vocal opponents of the three-year average legislation. Warren County Auditor Matt Nolan has been their spokesman and he said “historically committees like this don’t do a lot” but if they approach it the right way and invite engagement from interested parties it could bear fruit.

“If they do it correctly and really try, I think it’s the way to do things in the sausage making process of governing, but it has to be done right,” he said. “If they meet once and all pontificate on why taxes are bad it’s not going to be a huge help.”

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