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By: Mary Kate McNamee
House Bill 1 seeks to provide an estimated $2 billion reduction in Ohio state income tax, according to “House Bill 1 Summary and Analysis,” by the Ohio Education Policy Institute. The bill, sponsored by Representatives Angela King and Roy Klopfenstein, would change how the state calculates property taxes, adjusting rates that have been in place since 1972.
Property tax rates are changing
According to the summary and analysis by the Ohio Education Policy Institute, House Bill 1 would transform Ohio’s tax system, transitioning from a graduated income tax structure to a flat tax rate of 2.75%. The rate structure isn’t the only aspect changing. The bill would also eliminate the property tax relief program, also known as the “10% rollback.” The 10% rollback offers relief to residential and agricultural property, saving taxpayers an estimated $1.22 billion in local property taxes. Currently, the state covers this cost and reimburses local school districts and local governments.
As the Ohio Education Policy Institute reports, of the total rollback amount, $805 million goes to K-12 school districts and Joint Vocational School Districts. The remaining $416 million is split across Ohio’s municipalities and agencies. Eliminating the 10% rollback would place this financial burden on local taxpayers instead of the state.
How does this affect taxpayers?
As the summary and analysis by the Ohio Education Policy Institute states, the elimination of the rollback would increase property taxes for all residential and agricultural taxpayers by the amount of their current rollback benefit. To combat this increase, House Bill 1 includes a provision that reduces the assessment percentage on residential and agricultural property from 35% to 31.5%.
This reduction, however, could leave local schools and governments financially vulnerable. The summary and analysis by the Ohio Education Policy Institute explains that local schools or governments with no bond or emergency levies could lose 10% of their property tax revenue due to the lower assessment rate. This could impact the amount of services a local school or government can provide.
Summary
Currently, House Bill 1 has been introduced to the House of Representatives and is still in the process of gaining approval. The bill would revamp the state’s approach to property taxes, leaving Ohio taxpayers in a critical situation.
Mary Kate McNamee is a student at Ohio University studying English Literature and History. Mary Kate writes for the news and human interest section of her school paper, and is interning for The Cleveland Observer for the summer.
