A Brief Discussion on Eliminating Ohio Property Taxes By Matt Mayer

By Contributing Writer on August 16, 2025

August 16, 2025

A Brief Discussion on Eliminating Ohio Property Taxes

Matt A Mayer / Aug 16, 2025
republished from Matt Mayer’s “The Patriot Mind Newsletter”

Former State Representative John Adams recently called me to discuss the proposed initiative to eliminate Ohio’s property taxes. Our lively discussion led to me digging into a few items to put the debate in proper context. As I told John, if we were starting Ohio new today, we would not have used property taxes as the basis to fund local government; rather, we would have used sales taxes and, by doing so, would have been far more successful at constraining government growth. Why? People paying ever-rising sales taxes on things they buy daily would be far more aggravating than paying a property tax bill once per year. As a result, government requests to keep hiking the sales tax would have met strong opposition, thereby forcing them to keep spending in check. I also told John that I thought such an initiative would fail because local governments, especially police, fire, and schools, would run television and social media ads pushing a parade of horribles should property taxes be eliminated, as they did with the Senate Bill 5 repeal initiative on government collective barging reform.

Based on 2022 data, Ohio property taxes raised about $19.5 billion for local government, with 60% or so going to schools. Of those funds, 90% go towards teacher and administrator pay and benefits. With Senate Bill 5’s defeat, there really is no way to cut or restrain local government pay and benefits. Big Labor is on one side of the negotiating table opposed by school board members elected by Big Labor’s members and donations. It is a heads we win, tails you lose scenario. Based on inflation and the more recent jump in property taxes, I estimate that Ohio property taxes will hit $25 billion in 2025. So, eliminating property taxes would presumably require raising the sales tax in Ohio.

How much of a sales tax hike?

Well, in the state fiscal year that ended June 30, 2025, the 5.75% state sales tax raised $14.1 billion for state government, so local sales taxes would have to be raised at least that much. If my math is right, the $14.1 billion came from $245.2 billion in sales. That means to raise $25 billion to replace eliminated property taxes, local governments would have to have a tax rate of 10.0%, which along with the state sales tax of 5.75% would push Ohio’s combined sales tax to 15.75% on all purchases. Currently, Louisiana has the highest combined state and local sales tax at 10.12%, so an Ohio sales tax of 15.75% would far and away become the highest sales tax in America. That level of taxation would make Ohio even more unattractive than it already is. Thus, while eliminating property taxes sounds great to those of us paying high property tax bills, I don’t think I would trade it for substantially higher sales taxes on everything I consumed every day. Would you?

I think a far likelier approach would be to pass an initiative that substantially slows the growth of local government going forward by constraining property and sales tax increases. Without government collective bargaining reform, the only viable way to slow local government spending is to consolidate governments to eliminate lots of administrative jobs (i.e., quad-county governments or school districts), eliminate teaching jobs in school districts that have declining enrollment, and, most importantly for the long term, move all government workers from a defined benefit (DB) retirement pension to a defined contrition (DC) retirement account. To hold existing workers harmless, I’d propose current government workers be grandfathered so they can keep their DB pension, but that all new government workers be given a DC account. Based on Michigan doing this exact transition starting in 1997, Visiting Fellow Mary McCleary previously estimated it would take about twenty-nine years to transition from 100% DB pensions to 100% DC accounts for government workers.

If there is a funding gap due to a decreasing number of government workers paying into the DB system as the years go by, a temporary “pension transition tax” may be required to fill the gap. How this tax would work and to whom or what it would apply (i.e., existing government pension benefits) could be part of the negotiation, but it likely would be needed. Once the transition is done, that temporary tax would be eliminated and, thankfully, taxpayers would NEVER be on the hook again for underfunded/overpromised government defined benefit plans, as is the case today. Had Governor John Kasich and the Ohio General Assembly listened to Mary when she issued her excellent policy recommendation*, Ohio today would have a majority of government workers in the DC account (58%) with 42% still in DB pensions and savings to Ohioans of $1.5 billion.

*Please note: Mary wrote her piece when I ran The Buckeye Institute and she was our Senior Policy Analyst, but they’ve since removed all work done before their current president’s tenure from their website so I linked the piece (and all of our excellent work from 2009-2011) on the Opportunity Ohio website.

With Vivek Ramaswamy in support of property tax reform, there is hope that Ohio will do something positive to rein in increases. It is one thing to have high property taxes when you don’t pay an income tax. To get it with both is tough on most people.

Editorial Comments by Brian Massie, Average Citizen

Are the citizens asking too much to cut the bloat of state and local governments?