Marysville School officials are concerned with contents of Ohio House Bill 1 (HB1), painting the tax rollback legislation as a sort of wolf in sheep’s clothing.
“Those changes are going to trigger a number of things that may not be very good,” board member Dick Smith told the board at its meeting Thursday evening.
After being first mentioned by district treasurer Todd Johnson during the February meeting of the board, Smith dedicated a portion of his legislative report Thursday to HB1 which he said is listed as a priority bill.
The bill looks like a boon to taxpayers, offering reductions to both the income tax rate and taxable value of property in Ohio. But those reductions will show minimal relief to the average taxpayer, while benefiting the wealthy, according the Smith.
On the income tax side, HB1 proposes to drop the graduated tax rate in favor of a flat 2.75% rate for most Ohioans. Currently, those earning $25,000-44,250 pay 2.76%. Those earning $44,250-88,450 pay 3.23% and $88,450-$110,650 pay 3.69%. Those earning more than $110,650 pay 3.99%. Ohioans earning less than $25,000 per year do not pay income tax currently and will continue not to pay.
According to the Education Policy Institute, taxpayers across the state will save at total of anywhere from $1.8-2.5 billion, but Johnson noted that the flat income tax rate idea disproportionately benefits the richest taxpayers.
“It’s a massive change,” Smith said. “It may not provide as much benefit as people think that it might.”
In order to offset the lost funds from the income tax change, the legislature is proposing additional changes to the property tax code, and that is where the issue gets murky.
Smith explained that the bill proposes eliminating the current 10% rollback in property taxes. That policy was created in 1971 and essentially the state pays 10% percent of each tax bill.
To help negate the loss of the 10% rollback, the bill proposes to reduce the amount of a home’s value that can be taxed. Smith said HB1 proposes to reduce the taxable amount of a property’s value from 35% to 31.5%.
In essence, the 10% rollback is countered by a 10% decrease in the taxable value of homes. Smith explained that there is faulty logic in that tradeoff.
While the 10% rollback is covered dollar-for-dollar by the state, the reduction in taxable value would result in property owners making up a portion of the difference.
School bonds and levies are generally approved to generate a specific amount of money through a flexible millage amount. Even if the home values in a district rise, the millage would roll down so the bond or levy will never generate more than initially approved.
For this reason, if the taxable value of homes in a district is reduced, the millage will roll upward to generate the agreed upon dollar amount.
Johnson noted that the district would lose some money on collection from inside mills, which do adjust with property value changes. Entities other than schools which rely on money from property tax collection could also see a decrease.
The Ohio Education Policy Institute estimates that Ohio government entities and schools could lose $538 million annually if the bill is approved as is. This would be paired with a $929 million annual increase in taxes paid by residential and property taxpayers, as well as a $157 million decrease in payments from business and commercial property taxpayers.
Smith also noted that he and fellow board member Jermaine Ferguson are attending a legislative conference in Columbus next week and have set meetings with State Representative Tracy Richardson and State Senator Bill Reineke.