Circuit breaker targets tax help to those who need it
Posted January 10, 2024 in Press Releases
Policy Matters details property-tax proposals
The Ohio General Assembly’s joint committee to review the property tax began hearings today. It should consider a circuit breaker to provide property-tax relief to those who need it. Policy Matters Ohio recently outlined the benefits of such a policy, a form of which is already in place in most states. Today the organization released a report with more details on how one could work in Ohio, including the number of Ohioans who could be helped by the policy changes.
A circuit breaker directs dollars to those who are paying an outsized share of their income in property tax. With a circuit breaker, a qualifying household pays property taxes up to a set percentage of income. If the property tax bill exceeds this limit, the state picks up all or a portion of the tax payments above it.
“Property tax circuit breakers allow policymakers to target tax relief to those who need it, without compromising the tax base that supports public education, libraries and human services,” said Zach Schiller, report author and Policy Matters Ohio research director.
The new report delineates two possible circuit breakers modeled for Policy Matters by the Institute on Taxation & Economic Policy (ITEP), a Washington, D.C. nonprofit with a sophisticated model of state and local tax systems. Both options would:
- Cover homeowners and renters, who pay property tax indirectly through rent.
- Be worth up to $1,000 for homeowners and renters with income under $60,000.
- Further target relief by limiting eligibility to those with home values or rent payments that are below a certain level.
- Come as either an income-tax credit or as a standalone rebate for those who don’t pay income tax.
The plans primarily differ in the size and distribution of the benefits:
- One policy would kick in when property tax exceeds 5% of income and would benefit about one in six Ohio taxpayers. More than 40% of low-income Ohioans, earning under $22,000, would receive an average tax cut of $698. Almost a quarter of those with earnings between $22,000 and $45,000 would get an average benefit of $620.
- The other kicks in when property tax exceeds 3% of income for those with earnings under $20,000. It includes those who pay tax of $600 plus 4% of earnings between $20,000 and $40,000, and those who pay tax of $1,400 plus 5% of income between $40,000 and $60,000. More than a fifth of Ohio residents would benefit from this proposal, including more than 40% of those with income below $45,000, according to ITEP. The lowest-earning 20% of Ohioans getting a credit would average a benefit of $852.
“Various other proposals have been made to provide property-tax relief, but they don’t directly target those who need it like a circuit breaker does,” said Schiller. “Some also threaten revenue needed for public schools and vital local services.
“These proposals represent just two of the possible ways a circuit breaker could be structured,” he said. “The state could pay for it by rolling back special-interest tax breaks like the business income deduction, the sales-tax deduction for data centers and the Commercial Activity Tax exemption for suppliers to big pharmaceutical warehouses.
“Circuit breakers are commonplace across the nation. Ohio should join with other states and adopt one,” Schiller concluded.