Property taxes in Ohio: An unrealized gains tax burdening Highland County

By Dawson Barreras
Hillsboro City Auditor

While I do not directly administer property taxes – those are handled by the Highland County Auditor’s Office – I frequently hear from residents about the challenges they face with rising property tax bills.

From my vantage point, it’s clear that Ohio’s property tax system often functions as a tax on unrealized gains, unfairly burdening homeowners, particularly those on fixed incomes. In this article, I aim to highlight this issue, explain its impact on Highland County residents, and advocate for reforms to create a fairer system.

Understanding Ohio’s Property Tax System

In Ohio, property taxes are a vital revenue source for local services, including schools, public safety, and infrastructure. Administered by county auditors, these taxes are based on a property’s assessed value, set at 35% of its appraised market value, as determined by the county every six years during a state-mandated reappraisal, with triennial updates to reflect market trends. The appraised value is intended to represent the “fair market value” – what a property might sell for in an open transaction.

However, this system has a significant flaw: it taxes homeowners on the increased value of their property, even if they haven’t sold it or realized any actual financial gain. This effectively makes property taxes a tax on unrealized gains – theoretical wealth that exists only on paper. For many Highland County residents, this creates a growing financial strain, as tax bills rise without a corresponding increase in their ability to pay.

Why Property Taxes Feel Like an Unrealized Gains Tax

Consider a homeowner in Hillsboro who bought their home years ago for $100,000. Due to market trends – perhaps driven by low interest rates, corporate home-buying, or speculative bidding – their home is now appraised at $200,000. The assessed value rises from $35,000 to $70,000, significantly increasing their property tax bill. Yet, this homeowner hasn’t sold their home or pocketed any profit. They’re being taxed on a gain they can’t access unless they sell their home, which for many is not an option.

This issue is particularly pressing in today’s market. According to the Federal Housing Finance Agency, home values in Ohio have risen by as much as 62% over the past five years in some areas. In Highland County, the 2024 reappraisal process, overseen by my friend County Auditor Alex Butler, has led to significant valuation increases, which are now available for review on the Highland County Auditor’s website. These increases, while reflecting market conditions, translate into higher tax bills that hit residents hard, especially seniors and those on fixed incomes.

The Impact on Highland County

The consequences of taxing unrealized gains are felt deeply in our community. With a median home value of $157,000 and a median household income of $62,008, Highland County residents often struggle to absorb rising tax bills. Seniors, who have lived in their homes for decades, face the prospect of being priced out due to taxes based on market values they can’t realize without uprooting their lives. It’s criminal that a person has worked hard their whole life to pay off their house and still has to “rent” their property from the state. This is not just a financial issue – it’s a threat to the stability and character of our community.

A Call for Statewide Reform

While my role as city auditor focuses on municipal finances, I believe we must advocate for changes to Ohio’s property tax system to protect our residents. 

Here are some potential reforms that state lawmakers and local leaders could consider:

• Protect Fixed-Income Households: Expanding programs like the Homestead Exemption, which offers tax relief for seniors and disabled residents, could shield vulnerable homeowners from unaffordable tax hikes. Simplifying eligibility and increasing income thresholds would make this relief more accessible.

• Smooth Out Reappraisal Spikes: The current six-year reappraisal and triennial update cycle often captures volatile market peaks. A three-year averaging method, as proposed in House Bill 187, could stabilize valuations and prevent sudden tax increases.

• Address Corporate Market Influence: Policymakers should investigate how corporate home-buying and speculative practices distort local markets. Regulations to limit these activities could help keep appraisals – and taxes – more aligned with local economic realities.

• Explore Alternative Funding Models: Some have suggested replacing property taxes with a broader sales tax to distribute the burden more equitably. While this idea warrants discussion, any change must ensure that schools, emergency services, and other critical local programs remain fully funded.

Ohio’s property tax system, by taxing unrealized gains, places an unfair burden on homeowners who are simply trying to live in the homes they’ve worked hard to maintain. In Highland County, we deserve a system that supports our residents, not one that penalizes them for staying in their communities. 

Dawson Barreras is the city auditor for Hillsboro, Ohio. The views expressed here are intended to spark discussion and do not necessarily reflect the official position of the City of Hillsboro.