Study: Ohio property tax burden hinders economic growth

Baumgartner submitted written testimony during the second hearing on Senate Bill 66, a measure to adjust how the 20-mill floor for school funding is calculated,

”The study found that property taxes in the peer locations in Ohio were 72% higher than those of the peer locations analyzed across the country. High property taxes not only negatively impact current residents of Ohio, but also act as a disincentive for businesses looking to locate in our state," she wrote.

The study authors picked Ohio’s seven largest counties to analyze, including Montgomery County and Butler County. They compared data to the largest counties in six “peer” metro areas: Indianapolis, Atlanta, Detroit, Minneapolis, Raleigh, NC and Austin, TX.

The study found the average effective tax rate (ETR) on business investments in the property tax category — the study encompassed a number of state and local tax categories — is higher in six of the seven Ohio counties than the peer locations elsewhere.

The average ETR ranges from 3% in Wake County, North Carolina to 8.8% in Montgomery County. Butler County, with an average ETR of 5.4% was lower than all other Ohio counties and two of the other peer locations.

During the third hearing on Senate Bill 66, Tom Zaino, representing the newly formed Ohio Taxpayer Protection Act Coalition, said both the property and municipal income taxes are hurting the state’s prospects.

“I have heard from business leaders who were initially attracted to Ohio because of the favorable state tax climate created over the last several years, but now, in hindsight, express concern, or even remorse, after being hit with the morass of Ohio’s local taxes, including the complex municipal income taxes and high property taxes,” Zaino said.

Zaino, a tax and government policy lawyer and former state tax commissioner, told this news outlet that municipal income taxes — which most state don’t allow — are particularly burdensome for businesses wanting to invest in Ohio.

State legislators haven’t talk much if at all about changing local income tax policy — the state income tax laws have changed in recent years and more adjustments are on the table for consideration again — the property tax issue is a primary target for reform.

Zaino said as result of the study findings the Ohio Taxpayer Protection Act Coalition was formed by the Chamber, Ohio Society of CPAs and Ohio REALTORS Association, “to try and ensure Ohio remains competitive for job creation and keeping families here in Ohio.”

Property tax debate

Problems with the property tax system in the state have been festering for a long time, but really came to a head in 2023 when property value hikes topped 40% in some areas.

The triennial reappraisal update produced average countywide value increases of 37% in Butler, 34% in Montgomery, and 30% Greene counties, which triggered huge tax bills for many.

Sen. Bill Blessing, a Republican from Colerain Twp. who chairs the Senate Ways and Means Committee and co-chaired the special property tax reform committee last year, said they have to be careful when considering making changes to the system, based on economic development concerns.

“Here’s the catch, let’s say that we’re going to lower taxes to attract businesses, what other states are going to say well Ohio did that and we’re going to follow suit and you wind up with this race to the bottom,” he said.

“Whereas in years past businesses may have paid a significantly higher tax burden, now all these states are competing against each other for this, it might be good for businesses getting their benefits that way, what does it do to local services, whether it be public safety, schools, healthcare, what happens there?”

He noted that businesses are also looking for a talented and trained workforce when considering relocation but “how do you get that when we’re constantly giving businesses largess if you will and short-changing that side of the equation such that we’re not building housing, we’re not funding education, public safety, the amount we’re spending on that isn’t good. Doesn’t that make the state less attractive from a workforce standpoint? I would think it does.”

Rep. Dan Troy, D-Willowick, noted there are many new businesses coming into the state exacerbating the problem by negotiating long-term tax abatements, which isn’t good for all the existing homeowners and businesses, “we need to make the system as fair as possible and make sure no one is over-burdened at the expense of someone being under-burdened.”

House Republican leadership has appointed freshman Rep. David Thomas, the former Ashtabula County auditor, to spearhead property tax reform legislation. He said he has always been told Ohio is pretty competitive from a business tax perspective, because the state erased the tangible personal property tax and made other adjustments. But the property tax system can be problematic by its very nature.

“The uncertainty aspect is probably more of it, businesses come in, they buy property, they build a business and they don’t exactly know what they’ll be paying because it’s based on values and it’s based on delays in timeframes,” he said and later added his main focus isn’t on business attraction. “My priority is on the residential side and helping homeowners the most.”