Tax and revenue: Effective systems need reliable and predictable funding

Stable, sensible tax and revenue policy in Ohio is not only necessary to ensure that public institutions can provide services to communities, but it is also a load-bearing piece of the puzzle for addressing our other focus areas. Strengthening Ohio's public benefits system so people can meet their basic needs and work towards stability, closing gaps and improving health, social, and economic outcomes—this all costs money. Funding is essential.  

Our goal is to evaluate policy choices to align government resources with the needs of Ohio communities.  

Why does it matter? 

That funding ultimately comes from one predominant source: government revenue, which means taxation. Ensuring that Ohio has stable and sensible tax and revenue policies helps guarantee that programs supporting individuals, families, and communities have the resources they need, both today and into the future. Just as important, it helps ensure those resources are reliable and predictable, two core principles of effective public finance. 

Without stable government resources, it is virtually impossible to plan, invest, and respond to community needs. 

Behavioral health services, public health departments, and safety net programs all depend on consistent revenue streams. When revenues become unstable, the consequences are felt by communities through reduced or cut spending on services. 

Tax and revenue policy also influences who bears the cost of funding public services. Decisions made at the federal, state, and local levels not only determine whether governments have the resources available to address the needs of Ohioans but also how the burden of resource collection is distributed. As Ohio continues to face demographic shifts, workforce challenges, and growing demands for services, ensuring a sustainable revenue structure will remain critical. Without stable and sufficient revenue, the needs of Ohio's communities will never be fully met. 

What do we know about tax and revenue policy? 

The revenue available to government to address community needs is determined by two factors: economics and policy decisions. 

The economic reality, often outside the direct control of policymakers, significantly influences government revenues. During periods of economic growth, personal incomes tend to increase, leading to higher income tax collections. Consumer spending also rises, resulting in greater sales tax revenues. Together, these revenue streams provide much of the funding that supports government operations and services at the state level. During State Fiscal Year (SFY) 2026, sales & use and personal income tax accounted for 80.9 percent of state revenues funding Ohio’s General Revenue Fund (GRF).  

Property taxes are another critical component of Ohio's revenue system, especially at the local level, accounting for over 60 percent of all tax revenues collected by local governments.

Unlike income and sales taxes, which fluctuate more directly with economic conditions, property taxes provide a more stable source of revenue for schools, local governments, libraries, and other public services. However, recent increases in property values have also led to heightened concerns about affordability and tax burdens for homeowners. These discussions have highlighted the challenge policymakers face in balancing taxpayer concerns with the need to maintain the services communities rely upon. 

Economic conditions, however, are only one part of the equation. Policy decisions also play a significant role in determining how much revenue is available and how it is distributed.

Changes that reduce state revenue collections have downstream impacts on local governments and public institutions as they receive funding from the state. For example, Ohio's decision to move away from a graduated income tax structure and to a flat income tax was estimated to cut distributions to the Public Library Fund by $15.0 million for SFY 2024 and $16.0 million for SFY 2025.  

When state revenues decline, reducing support to local communities, the needs of those communities do not disappear.

People still need safe roads, public health services, emergency response systems, behavioral health supports, libraries, and other public services. As a result, local governments are often placed in the difficult position of either reducing services or asking voters to approve additional revenue through property tax levies. Local entities pay the price for state policymakers’ decisions. 

This interconnected dynamic helps explain why conversations about tax and revenue policy cannot focus exclusively on a single tax or level of government. Decisions made in Columbus or Washington has significant consequences for counties, municipalities, libraries, and nonprofit organizations across Ohio. 

Recent discussions about federal spending and budget reductions further illustrate this point. Federal investments support a wide range of programs and services throughout Ohio, including health care, social services, housing, workforce development, and infrastructure. When those resources are reduced, state and local governments are often left facing difficult choices about whether they can replace lost funding or must reduce services. At every level of government, tax and revenue policy ultimately determines the resources available to meet community needs.  

Where do we go from here? 

Tax and revenue policy debates often focus on whether the scale and size are rightsized, or if a change needs to occur. While those conversations are important, the more fundamental question is whether government revenue systems are capable of meeting the needs of Ohio communities. This work requires greater transparency and public understanding.

Residents deserve clear information about where public dollars come from, what those dollars fund, and what tradeoffs accompany proposed tax changes.  

Community Solutions will continue to fill the role of a trusted partner to provide direct and clear research on the impact of proposed policy changes. We approach this work by evaluating tax policy on whether it delivers results, not from a predetermined preference for higher or lower taxes.  

As an organization looking across a broad range of issues and working at every level of government, our role is to examining the interconnectedness of funding between the federal, state, and local levels of government and how these changes will impact the myriad health and economic outcomes for all Ohioans.