It was just a matter of time.
Sooner or later someone was bound to throw on the table a proposal to eliminate Ohio’s tax rollbacks for residential properties in response to the state’s budget crisis.
In a recent column, commentator Thomas Suddes listed the rollbacks as one of the big ticket programs that could be cut to help plug the projected $8 billion hole in Ohio’s budget. Eliminating the rollbacks would save the state about $1 billion a year.
The rollbacks reduce real estate taxes on owner-occupied properties by a combined total of 12.5 percent and have been in place since the early 1970’s. The state reimburses local jurisdictions from its general revenue fund for the loss in revenue due to the rollbacks. That totals over $64 million annually to support local schools, libraries, human services, parks and a variety of other services in Montgomery County.
To propose the elimination of this tax break for homeowners would normally be considered “crazy talk.” Indeed, Suddes suggested in his column that a governor who messed with the rollbacks would be committing political suicide.
Yet, in a report issued June 24, the Center for Community Solutions proposed a reduction in the state’s property tax relief programs through some sort of means testing, removing or reducing the rollbacks on properties with higher values. The report estimated that a reduction of 10 to 20 percent would save the state between $320 million and $640 million “with no adverse impact on most homeowners.”
A 12.5 percent jump in their tax bill would be shocking to any homeowner. Most would consider such an increase unacceptable. Taxpayers would be wise not to ignore as “crazy talk” any proposal to wipe out the rollbacks.
In fact, we should have seen this coming. Not long ago, all properties in Ohio received the benefit of a 10 percent tax rollback. Then the state legislature, as part of its 2005 tax reform package, removed the rollback for commercial properties.
Overshadowed by other elements of the reform package, eliminating this break for commercial property owners didn’t result in any great public outcry at the time. Some may see that as a precedent and hope that removing the rollbacks on residential property will be met with a similar response.
For some state officials, doing away with the rollbacks may be just too tempting to resist. This is a way to save millions of dollars each year without reducing any programs or forcing any service cuts. And, since property taxes are administered and collected at the local level, most of the wrath from angry taxpayers would probably be directed toward local officials.
Eliminating the rollbacks would certainly help deal with the state’s budget dilemma, but it would do so by dumping a greater tax burden on Ohio’s homeowners. For the average Montgomery County homeowner, that burden would amount to about $350 per year in additional taxes.
There are other negative consequences as well. Local jurisdictions would realize no additional revenues as a result of this tax increase, yet it would undoubtedly make it more difficult for schools and other agencies to raise more revenue in the future. A number of local school districts are already struggling to pass tax levies without this added burden.
Further, an increase in property taxes resulting from abolishing the rollbacks would add another bruise to an already weakened housing market.
The leaders of the special legislative commission formed to study ways to deal with the state’s budget woes have voiced their opposition to a tax hike. They need to be reminded that any reduction in the state’s property tax rollbacks is just that – a tax hike – one that homeowners should not be expected to bear.