There is a move afoot in several states, including Ohio, to eliminate property taxes.^[1] Less taxes sounds like a great idea, right?  Maybe.

As we begin, let’s acknowledge taxation policy can be a complicated topic.  Most states gather tax revenues from multiple sources, typically sales tax and income tax.^[2]  Other governmental entities within a state – counties, school districts, townships etc. – largely get their revenues from property taxes (aka real estate taxes), as well as intergovernmental funds. 

In Ohio, for the fiscal year 2021, combined state and local taxes amounted to $62.8 billion.  That total $ amount came from three primary sources.

Source: Legislative Service Commission

Income taxes are collected primarily by the state of Ohio, though many municipalities also impose a local income tax on wage income.  Similarly, Ohio sales tax is primarily revenue collected by the state; with counties often adding a local sales tax.^[3]  Property taxes, by contrast, are collected by counties and provide funding for county, municipal, school district, and other local government services.

Let’s look at funding sources for three local governmental entities in Ohio: the City of Columbus, Montgomery County (the domicile of Dayton) and the Village of Cedarville (admittedly very different municipalities).

These three examples support the notion that property taxes can be an important funding source for many local municipalities; admittedly the reliance on property taxes varies.  If, as some suggest, we eliminate property taxes, how will local entities receive funding?   How will schools function?  What about funds for roads and bridges? Funding for fire and police departments?  It seems that there are two choices: reduce local services and/or find funding somewhere else.  Both have their challenges, and these choices may be worse than the current situation.

Proponents of the action to eliminate property taxes are likely in favor of smaller government, and perhaps less intrusion into the lives of citizens.   There may be other arguments as well.   But let’s not forget about secondary effects and unintended consequences.   It is here that a quote from Hazlitt’s Economics in One Lesson is warranted “ This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups.  It is the fallacy of overlooking secondary consequences.”

While eliminating a tax sounds, on its face, wonderful (who wouldn’t mind having some extra disposable income?), one should also carefully consider the consequences of such an action.  How would Ohio we replace the ~$18 billion in annual property taxes in the state? If, for example, property taxes were to be replaced with a higher sales tax, how should we evaluate that impact, given that sales taxes are generally considered to fall  more heavily on lower-income individuals and families?

Admittedly, property taxes may be a significant burden on some taxpayers. Rather than abolishing property taxes, perhaps we can provide specific targeted relief to those most affected.^[4]

Taxes…it’s complicated.  Let’s carefully consider both the costs and consequences.

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[1] According to realtor.com, at least six states are in various stages of considering repeal of property taxes.  A group in Ohio called The Official Committee to Abolish Ohio’s Property Taxes, or Ax Ohio Tax, has been obtaining signatures to ask Ohio voters to support a change to the state’s Constitution.

[2] To the best of my knowledge, all states have some form of property taxes.  Nine states (notably FL, TX and TN) do not have state income taxes on wages.  And five states do not have a statewide sales tax.  Thanks, ChatGPT!

[3] As of October 2025, the base Ohio sales tax is 5.75%.  Total sales taxes are as high as a total of 8.0% (Franklin and Cuyahoga Counties) Source

[4] While beyond the scope of this post, some possible real estate tax reforms: adopt land use value taxation, expand property tax abatement programs, create exclusions from property tax increase (e.g.: for seniors), reform the real estate tax assessment process, modify the homestead exemption.