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What would be the economic effects of eliminating property taxes in Ohio?
Executive Summary
A full repeal of Ohio’s property tax would eliminate roughly $23–24 billion in local revenue and create a statewide fiscal gap large enough to force either dramatic cuts to local services or steep increases in other taxes; fiscal estimates and expert surveys conclude that outright abolition would be economically destabilizing. Analyses and reporting from state fiscal offices, local government associations, policy groups, and academic economists converge on three facts: property taxes fund the bulk of K‑12 education and local services, replacing them would be regressive or politically infeasible if done through sales or income taxes, and targeted relief (circuit breakers, credits) is the practical policy path advocated by many analysts [1] [2] [3].
1. Why proponents say elimination sounds attractive — and where that claim runs out of steam
Proponents frame property‑tax repeal as immediate relief for homeowners and a boost to household disposable income that could stimulate consumer spending and make Ohio more competitive for residents and businesses. The Ohio Senate and House budget messaging emphasize tax relief measures and credits intended to reduce burdens without ending local taxation entirely, suggesting political appetite for cuts rather than unconditional abolition [4] [5]. However, those same communications stop short of proposing full repeal and implicitly acknowledge the tradeoff: property taxes finance essential local functions and removing them without a replacement plan would shift the funding burden elsewhere, undermining the purported net economic gain [4] [5].
2. The arithmetic: how big is the hole and what fills it?
Multiple independent estimates place the revenue at roughly $22.6–24 billion annually, with about half of that directed to public schools and a majority supporting townships, cities, counties, and emergency services [2] [6] [1]. The Auditor‑style gap analysis shows eliminating property taxes would create a shortfall in the low‑to‑mid‑twenty‑billion range, meaning any replacement scheme must replicate that scale. Studies modeled by fiscal groups find that replacing the lost revenue with sales taxes would require unrealistic rate jumps and state limits on local sales rates constrain that option; replacing with local income taxes would produce average local rates rising into double digits in many counties, producing significant distributional and political problems [1] [7].
3. Distributional and volatility risks — who wins and who loses
Replacing property revenue with higher sales taxes would be regressive, hitting lower‑income households hardest because they spend a larger share of income on consumption; shifting to income taxes concentrates burdens on earners and could push local rates to double digits in poorer counties [1] [7]. Economists surveyed by state outlets warned that property taxes provide stable, predictable revenue, whereas sales and income taxes are more cyclical and would increase fiscal volatility for local governments, likely producing fluctuating budgets and service cuts during downturns [3]. Rural townships and school districts with little retail or income base would be disproportionately harmed, since they lack alternative tax bases to generate replacement revenue [6] [1].
4. Impact on schools, public safety, and local government capacity
Property taxes currently underpin the bulk of school funding and local services; auditors estimate that roughly $13 billion of the property tax total funds education directly. Experts and local officials argue that without full replacement, districts would face reduced per‑pupil spending, consolidations, or service rollbacks for police, fire, EMS, and road maintenance [1] [3] [6]. Reports emphasize that the magnitudes vary by jurisdiction—some districts receive up to 90% of certain budgets from property levies—so a uniform abolition would not produce uniform outcomes and could create severe localized educational and public‑safety crises [6] [1].
5. Alternatives on the table and political reality — targeted relief vs. blanket repeal
Policy analysts and associations recommend targeted interventions—homestead and owner‑occupancy credits, circuit‑breaker refunds tied to income, limits on revenue growth, and selective elimination of exemptions—rather than wholesale repeal, arguing these preserve local revenue while reducing burdens on vulnerable households [1] [2]. Political proposals to pursue a constitutional amendment to abolish property taxes have surfaced, but legislators and fiscal officials call such moves “irresponsible” absent a credible replacement plan and warn of severe fiscal and service consequences [8] [2]. The consensus across government analyses, policy groups, and economists is that full abolition creates untenable tradeoffs; targeted relief paired with structural reforms offers a fiscally sustainable path with fewer distributional distortions [3] [1].