HOUSE BILL 1
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Summary of House Bill 1
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SPONSOR(S)
Rep. Adam Mathews (District 56)

​TARGETS
All schools in Ohio
School funding

​​​DESCRIPTION​
Changes how property taxes and income taxes are assessed, reducing the amount of total revenue available to fund education in Ohio
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COMMITTEE
House Ways and Means Committee

INTRODUCED 
February 15, 2023

TESTIMONY
Read Testimony | Watch Testimony

BILL
General Info | As-Written | Analysis 

What does House Bill 1 do?
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Income Tax
  • Repeals the graduated income tax rates that apply to nonbusiness income (currently ranging from 2.765% to 3.99%), and instead levies a flat tax rate of $360.69 plus 2.75% on all income over $26,050

Property Taxes 
  • Authorizes the Tax Commissioner to extend any county’s property tax reappraisal or triennial update period by one year starting in tax year 2024 through 2029
  • Decreases, from 35% to 31.5%, the percentage of real property’s value that is subject to taxation
  • Indexes that 31.5% rate so that it decreases in proportion to the increase in inflation
  • Repeals the 10% tax rollback on nonbusiness property
  • Modifies the 2.5% homestead tax rollback to equal a flat $125 property tax credit for all owner-occupied homes
  • Establishes an enhanced homestead exemption for certain long-term homeowners who qualify for the general homestead exemption
  • Indexes, for all homestead exemptions, the amount of the exemption so that the exemption, and resulting tax savings, increases in proportion to the increase in inflation​

Fiscal Impact (per Legislative Services Commission)
  • The bill eliminates most state income tax brackets for nonbusiness income and imposes a marginal tax rate of 2.75% on income in excess of $26,050. The permanent tax cut would reduce all funds revenue by approximately $1,734 million in FY 2024, $1,854 million in FY 2025, and increasing amounts in future years.
  • In addition, a one-time revenue loss is expected in FY 2024 resulting from revised employer withholding tables issued by the Tax Commissioner. LBO’s preliminary estimate of this loss is $867 million, which would bring the all-funds revenue loss estimate to $2,601 million in FY 2024.
  • The revenue losses will be shared by the state GRF (96.68%), the Local Government Fund (LGF, Fund 7069), and Public Library Fund (PLF, Fund 7065). The LGF and PLF each receive 1.66% of GRF tax revenue under codified law. Therefore, the revenue loss to the GRF is estimated to be $2,515 million in FY 2024 and $1,792 million in FY 2025 and the loss to both the LGF and PLF is estimated to be $43 million in FY 2024 and $31 million in FY 2025. 
  • The bill reduces the property tax assessment rate on real property from 35% to 31.5% in tax year (TY) 2024 and then indexes the assessment rate to inflation beginning the following year. This would result in revenue losses to school districts and local governments estimated at $538 million in FY 2025 and increasing amounts in future years.
  • The bill’s decreasing real property assessment rates generally are expected to increase state aid to school districts through the state foundation aid formula, offsetting local tax revenue losses to some degree beginning in FY 2026.
  • The bill eliminates the GRF reimbursement of the 10% rollback starting in TY 2024, which reduces GRF expenditures by an estimated $1,309 million per year. The GRF will realize about half a year of the savings in FY 2025 and the full annual amount continuing in subsequent years. 
  • The bill changes the rollback for owner-occupied residences from 2.5% of most taxes levied to $125 beginning in TY 2024. This may increase expenditures from the GRF to reimburse school districts and local governments for the rollback by $150 million to $180 million per year. About half of that cost ($75 million to $90 million) would be incurred in FY 2025. 
  • The bill provides an enhanced homestead exemption for long-time, low-income residents, which may increase expenditures from the GRF to reimburse school districts and local governments by an estimated $121 million per year. About half of that cost ($60 million) would be incurred in FY 2025. 
  • The bill indexes the amount exempted by the homestead exemption to inflation. This change, in conjunction with the changes in the assessment rate and the rollbacks, is estimated to increase the amount of the exemption and GRF reimbursements by about $28 million for TY 2024 and by similar amounts in years thereafter. 
  • The bill states that the legislature intends to appropriate funds to local governments affected by the bill, but does not specify details or include these appropriations.