Auditors in Clark and Champaign counties object to some changes Ohio legislators approved in a $62 billion state budget, saying they will confuse voters and be a nightmare to administer.
The changes include adding an income limit on the state’s homestead exemption and eliminating a property tax rollback. They will help offset cuts to the state income tax that, in the long run, will lower taxes for residents and small business owners statewide by as much as $2.6 billion, said Rep. Bob Hackett, R-London, a former Madison County commissioner.
But county auditors said the changes will eliminate a tax cut of hundreds of dollars that some home owners were counting on and add layers of bureaucracy for their staffs.
“To me, they’re trying to mash two things together, and it’s not going to work,” said Karen Bailey, a Republican who serves as Champaign County auditor.
County auditors are trying to make sure residents know where the changes are coming from. In Clark County, auditor’s employees will hand out fliers explaining the changes and providing contact information of state legislators. In Hamilton County, a message at the top of the auditor’s website argues the change should have been vetoed.
“I think now we’re in a situation where we’re going to make darn sure the people know about it and let them take it to the legislators,” said Dusty Rhodes, a Democrat who serves as Hamilton County auditor.
Included in the budget are changes to the homestead exemption that will limit the tax break to residents with a gross income of less than $30,000 annually. Previously, there was no income requirement for the exemption.
State legislators are also ending a long-standing practice of paying 12.5 percent of local levy costs for new and replacement levies. Although many residents may not notice the cost, it will mean voters will pay 12.5 percent more for new and replacement levies approved beginning in November.
The new state budget will benefit residents and small business owners overall, Hackett said, by slashing the state income tax by 10 percent over three years and offering a 50 percent tax deduction for business owners on up to $250,000 of income.
“We wanted to continue with significant tax cuts, and this time we wanted to do it both with individuals and small businesses,” Hackett said. “Like anything else, we have to balance.”
Other state legislators, including Sen. Keith Faber, R-Celina, and Rep. John Adams, R-Sidney, did not return calls or declined to comment. Staff members for Sen. Chris Widener, R-Springfield, asked that questions be emailed to his office but did not provide a response.
The changes will mean confusion and higher property taxes for residents, said John Federer, Clark County auditor and a Republican. He described a scenario in which one resident might already receive the homestead exemption, but a next-door neighbor who turns 65 next year would no longer qualify.
“It’s going to be a difficult thing for people to understand,” Federer said.
In Champaign County, about 3,400 residents now receive the homestead exemption, according to information from the Champaign County Auditor’s Office. For most home owners, it means a tax break of between $300 and $400 annually.
“In an aging community like Clark County and probably Champaign County, as people are coming on and times are difficult, (residents) were looking for the benefit of the homestead, and now they won’t get it,” Federer said.
To determine which residents qualify for the homestead exemption, Bailey said it will mean her staff will have to ask some senior citizens to provide their personal income information to make sure they qualify.
Bailey sent a letter to Ohio Gov. John Kasich, asking him to veto the change to the homestead exemption, although the change ultimately ended up being approved.
“Governor, I would not hesitate to comply with your legislation if I thought it was fair and equitable,” Bailey’s letter said. “As it is presented, I cannot support this legislation.”
The elimination of the property tax rollbacks for levies will also mean headaches for residents and local governments, the auditors said. The law does not apply to renewal levies, or levies that were approved before November. That means auditors will have to work with software vendors and create costly new tracking systems to separate the levies that fall under the old rules from the new ones.
“The implementation will be very difficult and cost counties a lot of money,” Federer said.
Eliminating the rollback will make it easier for schools and government entities to pass renewal levies, but harder for new and replacement levies to get on the ballot, Hackett said. He said that may force the state to look at other ways of funding those entities in the long-term.
It may cost counties more up front to track the levies, but Hackett argued counties will also receive more revenue from an increase in the sales tax as well. Hackett also said legislators will have to monitor the effect of the homestead exemption changes to make sure it doesn’t hurt middle-class, elderly residents.
“People like the status quo and don’t like change, but they’ll find ways to do it, and technology is so strong these days I think it can easily be done without a huge increase in costs for the local governments,” Hackett said.
But Rhodes, Hamilton County’s auditor, said the end result of the changes will be to cut more revenue from local governments and increase costs for some property tax owners.
“What they’ve done is they’ve put more of the burden on the property tax owner, and they’ve made our job a hell of a lot harder,” Rhodes said.
What the changes mean for you:
Included in the state budget are changes to the homestead exemption that will limit the tax break to residents with a gross income of less than $30,000 annually. The exemption was previously available to all homeowners older than 65 regardless of income, as well as for homeowners who are permanently disabled. It allows qualifying homeowners to exempt $25,000 of the market value of their home from all local property taxes. Residents who already receive the exemption will be continue to receive the tax cut and will not be affected. Typically, the exemption is valued between $300 and $400 a year, according to local auditors.
State legislators are also ending a long-standing practice of paying 12.5 percent of local levy costs for new and replacement levies that pass, beginning in November. Previously, the state provided a 10 percent rollback for all real property that was not intended primarily for business activity, as well as a 2.5 percent rollback for all owner-occupied homes. The rollbacks meant many residents paid about 12.5 percent less for local property tax levies, which the state reimbursed to local governments and schools. The change will affect new and replacement levies beginning with those that pass on Nov. 5 this year. Renewal levies and those levies already on the books will not be affected.
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The Springfield News-Sun has reporters who cover government spending and tax issues in Washington, Columbus, Springfield and Urbana.