The group and others have said the services property taxes pay for, schools, police and fire, social services and more, would likely have to be covered with income and sales taxes.
Last week, the House released a new package of property tax reforms that would among other things erase guaranteed inside millage for cities, counties, schools and villages and force them to rely on other revenue streams like income and sales tax. Inside millage for townships won’t be touched because they don’t have any other revenue options, but they would be limited to the amount levied in tax year 2024.
State lawmakers who proposed the reforms said eliminating inside millage would save taxpayers $3.5 billion in taxes. Inside millage is the percentage of a home’s value that can be taxed without voter approval, per the Ohio Constitution.
Warren County Auditor Matt Nolan, who is president of the County Auditors Association of Ohio, said getting the constitutional amendment on the ballot would be “unprecedented” but if they do, he doubts it would pass, “I think voters are smart enough to know that’s not a good plan to jump off the cliff and hope something catches you.”
Credit: NICK BLIZZARD/STAFF
Credit: NICK BLIZZARD/STAFF
“I always look at where other states are and North Dakota did this exact thing last year and it failed overwhelmingly, I think it was 63% to 37% it failed,” Nolan said. “The reason everything gave there was everybody hates property taxes, I hate property taxes but you’ve got to give an alternative to how we’re going to pay for things. This ballot initiative doesn’t do that. It basically says let’s end property taxes and then have the legislature, the same group that can’t figure out what to do, fix it.”
Beth Blackmarr, the spokeswoman for Citizens for Property Tax Reform, told this news outlet signature collection is “going gangbusters” and if they don’t get enough signatures by June 30, they’ll keep collecting for next year. She said she doesn’t have a current signature count but she believes they have enough people circulating petitions to get the job done.
If it is successful, Nolan and the auditors in Butler, Greene and Montgomery counties have calculated the potential impact on sales taxes. In 2024, Montgomery County collected $1 billion in property taxes, to replace that revenue stream with sales taxes would require a rate hike from 7.5% to 18.5%.
The rate breakdown is 5.75% to the state, the county gets 1.25% and .5% is a transit tax. Sales tax is the main county budget revenue source and they collected $123 million last year and the transit system got $49.3 million.
If the ballot initiative fails and HB 335 passes it would take a 1.2% sales tax increase to make up for lost inside millage. To put things in perspective, the 1.2% adds $360 to the price of a $30,000 car and $15 on a $1,300 refrigerator.
Only the state, municipalities and schools are allowed to charge income taxes. According to state documents examined by the Dayton Daily News, Montgomery County residents paid $385.4 million in 2023 to 19 cities and villages and $332.2 million to the state. Only two school districts in the county — 210 of 611 school districts collect income tax statewide — avail themselves of this revenue stream. New Lebanon and Valley View collected $2.3 million and nearly $7 million respectively in 2023.
Counties aren’t involved in income tax collection so it is difficult to determine how much income tax rates would need to increase to offset a $1 billion property tax loss. However the study by this news outlet shows the vast majority — all but Farmersville and New Lebanon — of municipalities are already above the state authorized 1% income tax rate. Rate increases will require voter approval for all.
Montgomery County Auditor Karl Keith told this news outlet the ballot effort is perfectly understandable, albeit risky.
“Those homeowners are calling for relief and the legislature has been slow to respond. With this ballot initiative, property owners are taking matters into their own hands. They hope to force our legislators to take action to address Ohio’s property tax crisis. I agree with their sentiment,” Keith said. “However, eliminating $24 billion in property tax revenue statewide would decimate vital services like police, fire and schools.”
In Butler County, Auditor Nancy Nix said to make up a countywide $660 million property tax loss with sales tax, would require a 14.83% sales tax rate, a 128% increase from the current 6.5%.
Assuming the state legislature would approve raising the current 8% sales tax rate limit — for the state and local entities combined — that’s a risky revenue source.
“There needs to be a balance among the various types of taxes, income, sales, property, when you shift everything over to sales tax you are damaging your whole economy,” Nix said. “Because people can make choices, they can stop buying or they can buy across the borders in other states. So then that crashes your retail market, it takes a wrecking ball to all functioning systems.”
The inside millage for the county, schools, cities and villages amounts to around roughly $118 million and the sales tax rate would likely need to increase from 6.5% to 8%, if HB 335 passed.
Greene County Auditor Kraig Hagler said they collected $382.3 million in property taxes last year and currently shoppers are charged a total sales tax of 6.75% between the state and county. To cover the property tax loss and $36.5 million general fund revenue, sales taxes would have to increase 154% to 17.2%. The loss of inside millage in HB 335 would require a 1.2% sales tax rate increase.
The state figures for municipal income tax collection are self-reported and only five of the 10 taxing bodies reported their collections. Since half the municipalities, including the Beavercreek the largest city are missing, the numbers aren’t instructive.
Hagler agreed with his peers eliminating property taxes is not the answer.
“Eliminating property tax takes away the voice of voters and does not give communities the ability to chose the level of service of many things, most importantly police and fire,” he said. “Most police and fire departments are funded through property tax levies, along with libraries, Council on Aging, park departments and roads. The property tax system needs to be overhauled not abandoned.”
In Warren County, the property tax collection was $637.1 million for all taxing entities and sales tax would have to jump to 18% up from 6.75% to cover property taxes and general fund sales tax. If only inside millage were removed, the sales tax would have to increase just under 1%.
The 10 municipalities countywide collected $88 million and only Corwin and Waynesville are not yet at the 1% threshold to ask voters to increase proceeds. The state received $297.2 million. Carlisle is the only school district with an income tax, they received $3.5 million in 2023.
Increasing income and sales tax requires voter approval and Nolan said counties couldn’t even get on the ballot until next May, “even in the best case scenario these local governments wouldn’t be able to start collecting replacement money for 10 months.”
“You have this huge timing gap but then you also have this assumption that people are going to pass these which they’re not,” Nolan said pointing to Franklin where they had two levies on and both failed. “As we saw in Franklin, as we see a lot, people say you’re asking for too much I’m going to fail everything. What would really happen, when you force all these things onto the ballot everything would fail and it would result in massive underfunding of police, fire, Veterans Services.”
About the Author