In a memo to Gov. DeWine, OBM Director Kim Murnieks cautioned that eliminating property taxes – which generate an estimated $24 billion annually – would immediately destabilize local budgets, forcing deep cuts to essential services such as law enforcement, first responders, schools, libraries, parks, infrastructure, and senior and human services. 

The memo comes in response to a proposed constitutional amendment that would eliminate property taxes statewide and permanently prohibit them in Ohio. Specifically:

• Public Education: Roughly three-fifths of property tax revenue supports local schools. Abolition would likely lead to significant layoffs, larger class sizes, school closures, and program reductions. Schools would also lose their most stable source of funding for facility maintenance.

• Police, Fire, and EMS: Safety forces rely heavily on property tax levies. Repeal could result in station closures — particularly in smaller communities — reduced staffing, and slower emergency response times.

• Libraries, Parks, and Human Services: Services funded by local levies, including senior services and developmental disability programs, would face severe cuts or elimination.

OBM also outlined the challenges of replacing lost revenue. The memo estimates:

• Income Tax Replacement: The state's current flat income tax rate of 2.75% would need to increase to approximately 11–15% statewide to replace property tax revenue. If imposed locally, rates in some counties could approach 27% — levels exceeding top brackets in high-tax states.

• Sales Tax Replacement: The state sales tax would need to rise from 5.75% to an estimated 15–18%, far higher than any other state. Alternatively, the sales tax base could be expanded to include currently exempt items such as groceries or healthcare — changes that would require statutory and potentially constitutional amendments.

Beyond rate increases, OBM warns of broader structural risks, including:

• Greater revenue volatility, as income and sales taxes fluctuate more sharply during economic downturns.
• A loss of local control, since property tax levies are directly approved by voters.
• Significant risks to local government debt and bond ratings, as property tax revenue is often pledged to secure bonds. Elimination could trigger defaults, lawsuits, credit downgrades, and higher borrowing costs.
• Potential ripple effects on bond ratings, increasing borrowing costs and straining resources.

The memo concluded that abolishing property taxes without a viable replacement plan would effectively “defund” core local government services statewide. The memo can be viewed here.

OML will continue to monitor developments regarding the proposed constitutional amendment and its potential impacts on Ohio’s municipalities.