Ohio Retail Sales Tax Law of 1935
During the Great Depression, public schools in Ohio faced a financial crisis. Most schools received their funding through property taxes. Many Ohioans failed to pay their taxes because of the difficult economic times. As a result of people's failure to pay their taxes, schools had less money to pay educational expenses. Exacerbating the situation, Ohio voters limited taxes on real estate to ten mills, further reducing the funds available to public schools.
To prevent the financial collapse of the public school system in Ohio, the state legislature implemented the Ohio Retail Sales Tax Law of 1935. Before 1935, sale taxes in Ohio were rare. There had been sales taxes on cigarettes and on gasoline, but most products escaped taxation. Under the Ohio Retail Sales Tax Law of 1935, the Ohio legislature continued to tax cigarettes and gasoline, but now most items sold in stores faced taxation. The sales tax dramatically increased money to schools. Enacted on January 1, 1935, in its first year the Ohio Retail Sales Tax Law of 1935 provided more than 16.8 million dollars to public schools. The sales tax actually brought in more than 47.8 million dollars in 1935. The remaining money went to local governments, to relief for the poor, to retirement pensions, to administrative and collection costs, as well as to several other areas. The Ohio Retail Sales Tax Law of 1935 marked a dramatic shift in funding for public schools. First of all, the state was playing a larger role in school funding than ever before in Ohio's history. In addition, the shift to a sales tax illustrated a declining reliance on property taxes to finance schools to other forms of taxation.