Blessing Issues Statement on Property Tax Ballot Initiative
COLUMBUS—Senator Louis W. Blessing, III (R-Colerain Township) issued the following statement on the proposed ballot initiative to eliminate property taxes in the state of Ohio:
"With property taxes at the center of Ohio's political debate, and a looming ballot initiative as part of the backdrop, lost in the discussion is the philosophy behind property taxation. Respectfully, most proposals seem to be taking a meat axe to our system of property taxation without considering that drastic, across-the-board cuts, or ending them entirely, can actually make things much worse. A metaphor for the ballot proposal is panic in the face of a grease fire, and reaching for the water.
"The assumption is that state and local government can make up for the loss of funding through either income or sales tax increases, and that would be the end of it. Implicit in this assumption is that property taxation has no benefit other than raising revenue, and can be easily swapped out with other sources. In reality, taxation can change behavior in both good and bad ways in addition to its revenue-enhancing abilities. A simple example is high taxation for tobacco. Smoking is bad for you, and to discourage it the state can make it more expensive to do so through taxation. Conversely, offering tax incentives to start or continue smoking would cause massive damage through reduced revenues and higher healthcare costs. It’s also the case that some taxes are more regressive than others. Sales taxes, which seem to be the likely candidate to replace property taxation, are more regressive than property taxes.
"With respect to property taxes, would it surprise you that modest property taxation, compared to none at all, actually increases home affordability? Before you scoff at the idea, please read the following from the Minneapolis Federal Reserve: https://www.minneapolisfed.org/article/2024/how-higher-property-taxes-increase-home-affordability. I think you'll find this to be relatively intuitive if you view property taxes similarly to interest rates. Anyone who has purchased a home knows that higher interest rates make housing more expensive. Consequently, higher interest rates push housing prices down if they remain high enough for long enough. Property taxes work the same way in the sense that your PITI payment - Principal, Interest, Taxes (property), and Insurance - represents your monthly payment for your home. Thus, getting rid of the "T" operates like an interest rate cut and will lead to higher home prices.
"Thus, I think it’s entirely reasonable to suggest that ending property taxation in Ohio, or even massive across-the-board cuts, will lead to life becoming more expensive for the majority of Ohio’s citizens. Assuming the same level of spending at the local level, with sales and income taxes making up for the funding loss, we can see that the average middle class family will be faced with higher housing costs and a higher tax burden due to the higher sales and income taxes; again, the former is more regressive than property taxation, and the latter makes up a larger share of their tax burden (https://taxfoundation.org/blog/which-age-groups-bear-largest-share-tax-burden/).
"Now, I’m sure some will criticize the previous paragraph and say that local governments and schools are spending too much, and by extension are taxing too much. Thus, they need to tighten their belts. However, I am certain that the majority of school board members and local government elected officials in Ohio are, in fact, Republicans. I bring this up because our local leaders, irrespective of party, are united against drastic, across-the-board, property tax cuts. The only conclusion that makes sense is that, by and large, they have been good fiscal stewards.
"We could fight all day over the root causes, but I can tell you that property taxation was nowhere near as large of an issue in the 2010’s when I first started in the General Assembly as it is today. Property taxes are high because valuations are high, and valuations are high because we saw massive asset inflation during the pandemic. Drastically cutting property taxes, the main source of local government revenue, ignores the fact that inflation hit other areas as well, making the cost of service that much more expensive. I can assure you that these massive cuts can, and likely will, make things much worse.
"So who, or what, would be the most harmed if property taxation was abolished or drastically cut?The poor and middle class, particularly families who skew younger.
- Schools who would lose a ton of revenue.
- Local governments – cities, villages, townships, and counties – who would be scrambling to make up for the revenue loss.
- Pensions. Remember that the employers are political subdivisions. COLAs may be hard to come by.
Public safety. Also remember that the largest expenditure for most local governments is for police, fire, and EMS. - Seniors. Though they would see an increase in their home value and no property taxes, everything else would be much more expensive. The regressive sales tax would harm them, too, and exemptions they depend on – like not paying sales tax on take-out food and produce at groceries – would likely go away as the state attempts to make up for the $23.9B hole the ballot initiative would leave.
- Businesses, as their labor and real-estate costs would go through the roof. They’d also likely see other business taxes like the CAT increase.
- The school funding formula would be destroyed as it would assume more expensive valuations working against the schools, but those valuations would be tied to zero local revenue. In short, ending property taxes, and the resulting real-estate inflation, would mean less state funding.
"Who stands to gain? Without question those who own tons of real-estate. Thus, the biggest winners would be the largest landlords and wealthiest citizens. This would be an enormous benefit to them. We’d also face a major new problem that property taxation keeps in check: land hoarding.
"We obviously can't produce more land, and without property taxation investors can buy up land and sit on it indefinitely tax free. The scarcity in land will cause real estate development to become much more expensive as housing developers will have to deal with land "middlemen" who absolutely will demand a premium to either rent the land, or buy it outright. In fact, it may grind development to a halt. Historically, this has been a very real problem, and I would encourage you to read Winston Churchill’s speech decrying the injustice inflicted upon Britain by the “land monopolist”: https://cooperative-individualism.org/churchill-winston_mother-of-all-monopolies-1909.htm.
"It is fair criticism to be upset by the General Assembly’s inaction. However, this doesn’t justify doing something as drastic as ending property taxation in Ohio. Thus, I would encourage everyone to avoid signing the petition and, should it make the ballot, voting no and telling your neighbors to do so as well.
"In terms of what should be done, I think Warren County’s auditor – Matt Nolan – had a great compromise, and you should check out his testimony in Senate Finance. Though I think the 20 mill floor has value, I can appreciate reform in this space if it’s as far as we go, and we do more for school funding at the state level. With respect to the homestead exemption in his testimony, I would encourage folks to look at SB 215 as a possible option: https://ohiosenate.gov/members/louis-w-blessing-iii/news/blessing-introduces-bill-modifying-ohios-homestead-exemption-calculation. This is the lowest hanging fruit, as it benefits those who really need the relief: poor and middle class seniors just trying to hold onto their homes. It could even be temporary, scaling down with the difference going to school funding over time, or back to GRF.
"We can and should do something, but that something matters greatly. Drastic, across-the-board property tax cuts at the local level, from mandates at the state level, will absolutely make the problem worse. Targeted, state-funded relief will be cheaper, less disruptive, and ultimately better for Ohio."