State proposal linking housing costs to household income among property tax fix proposals

Credit: Nick Graham

Credit: Nick Graham

A proposal with some bipartisan support that emerged from a special committee of Ohio lawmakers exploring property tax reforms would offset the burden of property taxes with income tax relief.

State Sen. Louis Blessing, a Republican from Cincinnati and co-chair of the Joint Committee on Property Tax Review and Reform, introduced a so-called “circuit breaker” bill on May 15. It was referred to the Senate Ways and Means Committee on Wednesday.

The bill would give a refundable income tax credit of up to $1,000 for people earning less than $60,000 annually, if their housing costs exceed 5% of their gross income. It has an estimated price tag to the state of $925.3 million.

The proposal is based on a model by the progressive group Policy Matters Ohio. Zach Schiller, research director at Policy Matters has been pitching the “circuit breaker” for months as the best solution, one that is deployed in many other states.

Schiller told the committee this would benefit about one in six Ohioans. He said more than 40% of low-income residents, earning under $22,000, would get an average tax cut of $698. Almost a quarter of those earning between $22,000 and $45,000 would get an average benefit of $620.

“A property tax circuit breaker. As the name implies, much like an electrical circuit breaker prevents electric current overloads, it would reduce the load if property taxes are too high a share of income,” Schiller said.

“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. Those with high incomes are unaffected.”

This proposal is among a bevy of options lawmakers have to consider following 20-plus hours of testimony from more than 50 witnesses over eight hearings of the special committee, which concluded Wednesday.

Blessing and committee co-chair Rep. Bill Roemer, R-Richfield, told the Dayton Daily News they expect to have a report or recommendation before the General Assembly adjourns for the summer in late June.

Big costly ideas like the circuit breaker — if it gains support — will almost certainly have to wait until lawmakers pass a new budget next year.

“We’re going to put out a report, potentially two reports if there’s a minority report, not necessarily Republican or Democrat, but if members have other things they would like to do that’s not in the main report,” Roemer said. “From that we would look at legislation, I’ve talked to the speaker about this, we would look at legislation that could be done with the constraints we have this year, smaller items but still impactful.”

Property tax deferral

Associate State Director Amy Milam with AARP Ohio said they support the “circuit breaker” approach and also asked the committee to consider property tax deferrals.

“Property tax deferrals are used by governments to relieve the tax burden for taxpayers who have built equity in their homes but find paying their property tax bill from current income difficult,” she said. “Property tax deferrals delay, but do not excuse, taxes, which accrue as an increasing lien until the property is sold or the estate settled.”

Blessing told the Dayton Daily News the deferral program could be an attractive option.

“I think that might be a way to go and really there’s no money lost. Maybe a little bit here and there, but we could equalize that. Really all it’s allowing them to do is tap into their equity to pay for property taxes,” Blessing said.

“The state would recoup its money and I don’t know that the overall sum of money that the state is spending is going to reach a huge amount, because money is going out but they’re also getting these big lump sums coming in pretty quickly.”

Rethinking levies

A couple other reform suggestions also involve changes at the local level but would likely be difficult to accomplish because they certainly would spark turf wars.

The Buckeye Institute proposed vesting county commissioners with nearly complete — with the exception of schools — control over placing levies on the ballot.

Greg Lawson, a research fellow with the Buckeye Institute, acknowledged it would be controversial and it’s not a “silver bullet” but “we need to have a holistic approach rather than every single kind of entity looking for what they need.”

“Today, virtually all local levies may be placed on the ballot for voters without first receiving approval from county commissioners. Such direct ballot access fails to account for the limited perspective, information, and interests held by individual taxing entities that do not and cannot see the bigger economic picture or the aggregated financial effects of new levies,” Lawson wrote in his report. “County commissioners, however, have the benefit of a broader, countywide view and can better assess how new levies will impact residents. With the exception of school levies, county commissioners should be responsible for placing all local levies on the ballot.”

He offered a number of other ideas such as “incentivizing” local governments to share resources or consolidate, cancelling unfunded state mandates and increasing state funding to help local governments.

Untying ‘tangled knot’

Committee member Rep. Daniel Troy, D-Willowick, said some of Lawson’s ideas aren’t the purview of this committee per se because they are tasked only with the property tax issue.

He said service consolidation has merit, but it would be an uphill battle.

“It’s out there I think it’s something we need to take a look at,” Troy said. “Indirectly you’re saying it’s going to have an impact on the property tax system, good luck in getting there because you’re fighting some real turf protection.”

Whatever lawmakers decide, Lawson said it will take “a long, long time” and “band-aid” solutions aren’t acceptable, they must look at underlying issues.

“Overcoming two hundred years of inertia to untie the tangled knot of Ohio’s local government structure will not be easy. But it must be done,” Lawson told the committee. “Ohio property owners deserve a more efficient, effective, and inexpensive system.”

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