Thanks for the opportunity to provide some thoughts to the committee. Clearly, some Ohioans need property tax relief. Critically, this relief must be targeted to those who need it. The best way to accomplish that is what 29 states and the District of Columbia use in some form: a property tax circuit breaker that provides up to a set amount, paid by the state, to those who are spending more than a certain percentage of their income to pay property tax. This ensures that those who truly need relief get it, without damaging schools, libraries, townships, counties and all the others that depend on the property tax to deliver public services.
Policy Matters Ohio has produced a report that provides more details and testified several times to outline possible circuit breaker solutions. The General Assembly could set the parameters as it chooses, for instance: whether to cover renters, as 20 states do in some fashion and Senate Bill 22 would do; how much relief to provide; when it kicks in; and whether to phase it out gradually, as in House Bill 365.
Where would the money come from to pay for a circuit breaker?
We recommend that the General Assembly follow up on positive steps it took to reduce tax expenditures in House Bill 96 as a key means of doing so. There are many such avenues available:
- Means-test existing property-tax rollbacks, as Governors Voinovich and Taft both proposed. For example, Taft would have limited the 10% and 2.5% rollbacks to the first $1 million in market value of the property.
- Limit the Commercial Activity Tax break to suppliers of large pharmaceutical warehouses. The taxation department estimates that tax break will be worth $367.7 million this fiscal year and $404.3 million next fiscal year. In part, the cost of this tax break is a product of what is delicately known as tax planning, as the director of the Office of Budget & Management told the General Assembly in 2017. At that time, Governor Kasich proposed to limit the tax break by requiring suppliers to pay the CAT on at least 10% of the receipts they ship to these distribution centers. If that were set at 25%, it could raise roughly $100 million a year.
- Override the governor’s veto of the General Assembly budget bill provision that would prohibit any new agreements for data center sales-tax exemptions. The Legislative Service Commission estimated this could save up to $20 million a year. The cost of the sales-tax exemption for many data centers amounts to $1 million per job. For more details, see this report.
- Extend the sales tax to lobbying, public relations and debt service, which are not currently covered. Governor Taft proposed to do so in 2003, at which time this was estimated to raise $30 million a year (and that was before the increases in the sales-tax rate). The state preference for these businesses is undeserved. And lobbyists aren’t going to move to Harrisburg or Lansing because of such a tax.
- Repeal other special-interest tax breaks, such as the those for pre-1972 trusts that was to be repealed in the Senate budget ($7.7 million in savings in FY2027), the $800 sales-tax cap for fractionally owned aircraft ($9.8 million in revenue forgone in FY2026, according to the state’s tax expenditure report), and the CAT exclusion for qualified supply chain receipts ($3 million a year), a carve-out that goes only to a subset of businesses that operate out of a suburban Columbus business park.
- End authority for a broad sales-tax holiday and at most return to the more limited three-day one for school supplies.
- Repeal the $900 million business income deduction, or reduce it from $250,000 to $100,000, as the House did in its budget bill for the 133rd General Assembly. According to 2023 data from the Taxation Department, the latter would leave the deduction as it is for more than 626,000 business owners, or nearly 83% of those claiming the deduction.
These are not the only tax breaks that could be reined in to pay for a circuit breaker. They illustrate, however, that it is feasible. Other measures, such as expanding the homestead exemption or allowing for tax deferrals, could be positive steps to provide relief. However, the circuit breaker is the most targeted.
That’s critical, because while many Ohioans badly need property tax relief, not everyone does. House Bill 920 has been effective in limiting taxes for many; in Franklin and Cuyahoga Counties, for instance, while valuations went up 41% and 32%, respectively, taxes went up 6% and 9%. Of course, some property owners in those counties saw their taxes go up more than that and need help. But it illustrates that broad caps on property taxes are not a smart solution.
Thank you again for the opportunity to provide these comments.