By Maggie Thurber | Special to Ohio Watchdog
Every election voters struggle with the difference between renewal and replacement levies and what they mean to the taxpayer.
New levies are easy to understand — they’re a new tax on your property. Renewal levies are when the existing tax is being continued at the same rate, resulting in the same amount of money for the taxing entity.
Replacement levies are what always get people, especially when put up next to new or renewal ones.
Because of a law passed in 1976, Ohio has a tax rate and an effective rate for property taxes. When a property tax is certified for the ballot, the local county auditor must calculate the revenue it will generate. This is done by multiplying the levy millage against all taxable property in the jurisdiction, resulting in a total amount of income the taxing entity can expect. A mill is $1 of tax for every $1,000 of value.
Every three years, auditors revalue the property in their county. But many levies are four years or more. Whether the property values go up or down during the revaluation, the taxing entity gets the same amount for the term of the levy. This is done by the auditors who adjust the rate charged against each property to give the same dollar amount of the approved tax. The adjustment results in what is called the effective tax millage.
The purpose of the 1976 law was to provide stable funding for taxing jurisdictions, not subjecting them to the ups and downs of a local housing market. Funny that politicians worry about stability for the tax recipients but not the taxpayers.
But it results in replacement levies — the same millage as previously voted on, but applied to current property values. Entities traditionally go with a replacement when property values have increased since the last time the levy was approved by voters, as this gives them more money.
House Bill 502 could change that by eliminating all replacement levies.
Under this proposal, any property tax that isn’t a renewal would have to be called a new levy. When you replace a tire, you get a new one — at least, new to you. The same goes for just about anything else you might have to replace, such as a pair of jeans. You even say, “I need to get a new …” when you talk about it.
Perhaps the term replacement is intentionally confusing to mask the effect on the taxpayer and garner support at the ballot box. If all we were talking about was substituting one item with an exact duplicate, the term replacement might work.
But that’s not what replacement levies do. There’s a difference between buying a $20 pair of Old Navy brand jeans and a $10,000 pair of Escada Couture Swarovski Crystal jeans. While most replacement levies don’t have that big of a money difference, the point is the same.
So why wouldn’t we call these types of levies new?
There is a lot of logic in this proposal, and it would certainly be beneficial to voters and the decisions they have to make. But for that reason alone, expect the bill to go nowhere.