Inside millage taxes
Divvying up the property tax pie

Thursday, August 25, 2005

Mike Maurer
News analysis

Cheers to three local government officials who have done that most unusual of things: Hold fellow politicians to account.

Three Franklin County officeholders -- Auditor Joe Testa, Prosecutor Ron O'Brien and Treasurer Richard Cordray -- constitute a little-known, technical agency known as the county budget commission. It's the sort of agency that has only a "kind-of" job, which is to say, it's identified in Ohio law, given real duties, holds regular meetings and renders decisions, but usually, those decisions don't amount to anything beyond some necessary administration.

Put another way, the budget commission rarely causes any action to be changed or any policy to be reversed.

Early in August, however, voters were treated to a happy exception to this general rule. Cordray, O'Brien and Testa examined an application by Prairie Township to raise its taxes. For historical and bureaucratic reasons, this sort of request is rare. Regardless, in an environment in which it would have been easy enough to say yes, the budget commission said no.

"There seemed to be a lack of preparation when it came to demonstrating the need," Testa said. "They did not do an adequate job to justify the tax increase on their citizens."

Put that man in the Statehouse. And the Democrat Cordray, too.

Why is it unusual that the budget commission does anything of note? To know the answer to that, one needs to know the meaning of "inside millage."

Inside millage is (yet another) quirk of the Ohio tax system. The Ohio Constitution sets a minimum level of property taxation --1 percent of the value of your property, or 10 mills -- that local governments may take from you even without your vote. In contrast, if, collectively, they want more than 10 mills, they have to persuade 50 percent plus one of your neighbors to agree to take it from you. That's called "outside millage."

Because most or even all tax districts collect far more than the constitutionally provided inside millage amount -- the lowest nominal rate in Franklin County is more than 73 mills -- there's not much sense arguing about the first 10 mills, especially since the Constitution says you can't do much about it anyway. For the governments, however, every bit of revenue is as good as the next. Mills are mills.

In its failed request to the budget commission, Prairie Township was asking for 1.6 mills, which it calculated would raise $440,000 annually.

Generally speaking, inside millage constitutes "free" money for local governments; they don't have to bother asking voters for approval to collect it. All they have to do is persuade the budget commission to allow it. Compare such easy pickings with the seemingly annual, or even more frequent, levy exercises our school districts go through.

Not surprisingly, the free, easy money of inside millage was divvied up long ago as counties, cities and villages, school districts and townships, along with a few miscellaneous special governing entities, all laid their claims to their share of the 10 mills.

Once a government has this money in hand, it isn't likely to give it up, which means there's no opportunity for anyone else to claim it. This, along with the 10-mill limit to inside millage and the requirement that each government's tax rates be uniform, is why there is little change in the slices of the inside millage pie.

If you had to round it off to the nearest "good" or "bad," how would you rate the complexity of Ohio taxes? Is there even one person in 1,000 who cares enough to understand it? And if they don't understand it, can they vote on it responsibly themselves or elect representatives to do it for them? Count complexity as a stroke against the thing.

In the other column, however, the property tax is the most democratic of all taxes, the closest thing in American law to true "taxation with representation." For this very reason, governments, including school districts and courts, don't much like it, because governments are generally smarter than voters are, less selfish with the voters' money and know better than voters do what to do with it.

As a result, the government is always working to take your tax vote away and give to themselves, whether it is the General Assembly playing hide-and-seek with temporary-permanent sales taxes, the supreme court declaring low property taxes unconstitutional, cities begging for "regionalism" so that no one can charge lower taxes than they do, or everyone and their brother trying to live off federal subsidies paid by remote and anonymous taxpayers living, mythically, somewhere else.

In acting as it did, the Franklin County Budget Commission bridged voters' entirely rational ignorance of this messy process and their fundamental right to control their own taxes. The commission's denial of an otherwise easy tax increase was a too-rare example of government officials casting a jaundiced eye at government rationalizations.

Perhaps it will make no difference. Prairie Township will surely try again and eventually will get the job done, but nonetheless, voters should thank Cordray, O'Brien and Testa for working to understand Ohio's tattered taxes and acting on their behalf.

Mike Maurer reports on public affairs for ThisWeek.

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