Ohio Enacts Historic Property Tax Reform

Key Takeaways:

• The legislative package signed by Gov. Mike DeWine is expected to save taxpayers an estimated $3 billion over the next three years by limiting automatic tax hikes triggered by rising property values.
• The bills will result in a corresponding loss in future revenue to schools and other local governments.
• The package includes a one-time funding of $410 million for schools to compensate for lost funding.
• The bills will hike taxes on many landlords by a total of $300 million to help pay for an equal tax cut for property owners.
• The legislation gives greater authority to county budget commissions to unilaterally reduce voter-approved tax levies.

Introduction to Property Tax Reform
The state of Ohio has recently undergone significant changes to its property tax system, with Gov. Mike DeWine signing a package of bills that aim to provide relief to taxpayers. The legislation, which includes House Bill 124, House Bill 129, House Bill 186, House Bill 309, and House Bill 335, is expected to save taxpayers an estimated $3 billion over the next three years. This is achieved by limiting the automatic tax hikes triggered by rising property values, which have been a major concern for many Ohio residents. The bills will take effect in 90 days, delivering a top priority for legislative Republicans ahead of next year’s midterm election.

Background and Context
The issue of property taxes has been a major topic of discussion in Ohio for several years, with Republicans studying ways to cut property taxes for two years. The debate has been ongoing, with disagreements over how to pay for property tax cuts, whether through the state’s general revenue or through tax funding cuts from schools and other governments. The bills faced several challenges, including a veto by DeWine over the summer, which prompted lawmakers to revisit the issue. Meanwhile, a grassroots campaign to abolish property taxes altogether has been gaining momentum, with voters collecting signatures to put the measure on the November 2026 ballot.

Provisions of the Legislative Package
The package of bills signed by DeWine includes several key provisions. One of the main components is the capping of automatic tax increases that result solely from rising property values. This is expected to cut expected future increases in property taxes by as much as $3 billion. Additionally, the bills provide for "inflation cap credits" in communities where school districts’ tax rates are at the 20-mill floor, which refers to the minimum tax rate schools are guaranteed under state law. These credits will apply to about 80% of Ohio’s current communities, primarily in rural and exurban areas. The package also sets aside $410 million in one-time funding for schools to temporarily compensate them for any lost funding resulting from the inflation cap.

Impact on Schools and Local Governments
The legislative package is expected to have a significant impact on schools and local governments, which will experience a loss in future revenue. Critics of the bill believe that funding cuts for schools will prompt communities to seek tax increases, which could dampen the bills’ effects. On the other hand, the bills aim to provide relief to taxpayers, who have been facing significant increases in property taxes in recent years. The legislation also tweaks tax law to change how the 20-mill floor is calculated, which should reduce future automatic tax increases.

Tax Law Changes and Funding
The package of bills also includes changes to tax law, particularly with regards to landlords. The legislation hikes taxes on many landlords by a total of $300 million to help pay for an equal tax cut for property owners. This is achieved by expanding the "owner occupancy tax credit" for homeowners, while eliminating another exemption for landlords and other residential property holders who don’t live in the homes they own. The bills also give greater authority to county budget commissions to unilaterally reduce voter-approved tax levies, which could have significant implications for local governments and taxpayers.

Conclusion and Future Implications
In conclusion, the legislative package signed by Gov. Mike DeWine represents a significant overhaul of Ohio’s property tax system. While the bills aim to provide relief to taxpayers, they also have significant implications for schools and local governments. The impact of the legislation will be closely watched in the coming years, particularly as it relates to the state’s economy and the ability of local governments to provide essential services. As the bills take effect, it will be important to monitor their effects and make adjustments as necessary to ensure that the legislation achieves its intended goals.