Hearings continue on the top priority for Ohio House Speaker Jason Stephens (R-Kitts Hill), a bill to create a 2.75% flat income tax and make several property tax changes. Those are estimated to cost schools and local governments more than a half a billion dollars.
But opponents are also pointing out the bill could raise property taxes.
The Legislative Service Commission (LSC), the office that does research for state lawmakers, estimates House Bill 1 is a $1.7 billion income tax cut.
But the commission's fiscal analysis also estimated the bill would bring a $929 million increase in property taxes on homeowners and agriculture property owners, as well as a $538 million loss to schools and local governments.
‘This is by far the most complicated piece of legislation I've seen as far as it affects state and local government. And it is also, I think, maybe the most concerning piece of legislation I've seen as well, " said economist Howard Fleeter, who’s been studying and analyzing school funding for more than three decades. “My school and local government clients, I think, are viewing this as a five-alarm fire right now."
But not all property owners would see a tax hike. The LSC fiscal note reported business and commercial property owners would get a property tax decrease of $157 million in House Bill 1.
While this flat tax would mean a tax cut for all four tax brackets, the cut is significantly larger for those who have higher incomes.
The report noted: “The tax rate for nonbusiness income over $26,050 up to $46,100 is reduced by 0.5%, from 2.765% to 2.75%. For nonbusiness income over $46,100, marginal tax rates are reduced by 14.8% to 31.1%, depending on the bracket.” People with incomes under $26,050 will pay no income tax.
The bill is supported by Americans for Prosperity and Americans for Tax Reform, which are conservative groups. The Ohio Manufactured Homes Association also supports it, saying in prepared testimony that the bill recognizes that manufactured homes are taxed differently than other residential properties.
The OMHA also said it appreciates House Bill 1 for its effort in "reducing property tax burdens on homeowners", and noted an enhanced homestead exemption of $50,000 for homeowners who've lived in their homes for more than 20 years.
