Florida Property Taxes: A New Idea

We've frequently drawn attention to the pathologies of the Florida property tax system in recent posts. Assessment caps create unjustifiable inequities between similar homeowners; poorly targeted agricultural tax breaks benefit real estate speculators. But the bottom line on the Florida tax system is that it's the second-most-regressive in the nation, according to ITEP's January 2003 "Who Pays" report. From this broader perspective, property tax reform is akin to rearranging deck chairs on the Titanic. Until Florida moves away from its historic over-reliance on property tax and sales tax revenue and enacts a personal income tax, it will remain among the most punishing tax systems for poor and near-poor working families.

Of course, an income tax is not on the table for Florida elected officials right now. But in today's Fort Lauderdale Sun Sentinel, Broward Mayor Ben Graber calls for the next best thing: a property tax designed on the "ability to pay" principles that make the income tax uniquely progressive:

I propose development of a progressive ad valorem or real estate tax based on income. Those at the lower end of the economic scale will qualify for a yearly decrease or increase of their real estate tax based on individual economic circumstances.

Graber is understandably short on details-- this is, after all, an op-ed--but envisions implementing this change through an increase in the state's $25,000 homestead exemption.

This is, of course, exactly what property tax circuit breaker credits are designed to do, and do quite well in many other states. So from an originality perspective, Graber's idea is akin to Dr. Evil inventing the laser. But in Florida, where "success" in the progressive tax reform arena means making it through a year without repealing any more taxes, Graber's proposal is a bold one.

At the end of the day, the property tax problem to be fixed, in most states, is the basic disconnect between your property tax bill and your ability to pay it. From one year to the next, what happens to your property tax bill is largely determined by your home's market value, which operates completely independent of your financial circumstances. If your lose your job, the property tax doesn't care-- the bills keep going up. (By contrast, the income tax does a bang-up job of going up (and down) with your ability to pay it.)

Circuit breaker credits help eliminate this basic disconnect, by allowing tax credits for homeowners (and, sometimes, renters) for whom property taxes exceed a certain percentage of their income. They're cheap, they're targeted, and almost all states now have them.

At a time when Florida lawmakers are far more concerned with how to get rid of a projected budget surplus, Graber deserves credit for asking the hard questions about how to make Floridians less angry about the property tax--and also gets kudos for coming up with the right (broad) answer.