Blessing Introduces Bill Modifying Ohio's Homestead Exemption Calculation
COLUMBUS—Senator Louis W. Blessing, III (R-Colerain Township) introduced Senate Bill 215 which modifies the calculation and eligibility criteria for homestead exemption on property taxes.
Senator Blessing issued the following statement on the legislation:
"I'm pleased to announce the introduction of SB 215, a modified homestead exemption. It is much more flexible than the current homestead exemption law.
"Instead of a dollar amount off your valuation, it reduces the taxes you pay by a percentage based on your income. Suppose you pay $6,000 per year in property taxes. If your income is less than the median, you'd get a property tax break of 20%, which equates to $1,200. The percentage is reduced as income rises until it phases out at about $104,000.
"This fixes a number of flaws with the current homestead exemption, and we'll start with the biggest issue: the exemption amount is not correlated well with need or even inflation. The current exemption amount is tied to CPI, but that is not the same as real estate inflation. Worse, it wasn't increased to make up for years of lost value, having been held flat for more than a decade. Perhaps worst of all is the cliff effect. If you generally qualify for the exemption, but make more than $40,000 per year you get nothing. If you make a penny less then you get the entirety of the exemption. This is simply not good policy.
"Suppose the homeowner in the aforementioned example sees an increase in their property taxes to $8,000 per year. The benefit would then rise to $1,600. Thus, the homestead exemption increases in proportion to actual property tax increases. Conversely, if this same taxpayer sees a decrease in their tax bill—suppose a recession occurs—to $4,000 then they will receive $800 from the state. True, this is a decrease in benefit from the state but the taxpayer is also paying much less in property taxes.
"Let's review the income eligibility thresholds for a moment. Suppose you make $100,000 per year, which would mean that your benefit percentage is 4%. Further, assume that you're 65 years of age, on fixed income, and have a property tax bill of $8,000. Thus, your property tax savings would be $320. Though this may seem paltry, keep some things in mind.
"First, the homestead exemption in this situation today would be $0. Second, bear in mind that the income bands are 'moving' while your income remains fixed. It's plausible that you could be in a different income band and your percentage would be higher. So, in ten years, as inflation erodes your income away and property taxes increase, you may have a benefit percentage of 12% and a property tax bill of $10,000. Thus, your property tax savings would be $1,200, or roughly a four-fold increase.
"This legislation targets those Ohioans who are most vulnerable to property tax spikes: poor and middle-class seniors on fixed incomes who are struggling to stay in their homes. Obviously, parts of this legislation would likely change if the General Assembly chooses to take it up. However, it's a vastly superior framework to current law. I hope you agree it's worth taking a chance on."
Senate Bill 215 has yet to be assigned to a committee for further hearings.
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