Florida Gubernatorial Candidates on Property Tax Reform
In Florida, both major-party gubernatorial candidates have now unveiled their plans for reforming Florida property taxes.
Democratic candidate Jim Davis wants to cut the state's property taxes by $1 billion. The mechanism? An across-the-board cut in the level of local property taxes that the state mandates local governments must levy each year. So Davis's plan won't change the distribution of property taxes-- it will simply reduce everyone's taxes (homeowners, snowbirds, and businesses) by about the same percentage. Davis' website has more here.
Republican candidate Charlie Crist has a two-pronged plan. First, Crist wants to double the state's homestead exemption, which currently shelters the first $25,000 of an owner-occupied home's value from tax, to $50,000. Second, he wants to expand the state's absurd "Save our Homes" tax cap (the defects of which we have cataloged here and here), which limits the amount by which a home's taxable value can grow in each year to 3 percent, by making it "portable."
[A little background on the "portability" concept: right now, Florida homeowners accumulate more and more tax benefits from the 3 percent cap in each year they live in their house, gradually driving a big wedge between a home's actual market value and its (much smaller) taxable value. But under the Save Our Homes rules, when you sell your house and buy a new one, the gap between actual value and taxable value goes away, and the taxable value of your home is reset to equal what it's actually worth.
This obviously means that for long-term residents, selling their home has a downside: a big hike in property taxes. The sensible answer is to get rid of "Save Our Homes" entirely, so that every home in the state would be taxed based on its actual value. Crist's answer is to say that long-term residents will get to keep their tax breaks when they move.]
Each plan has its shortcomings. Crist's plan has two big ones: it would perpetuate the biggest inequity in the existing tax system (that is, the Save Our Homes tax cap), and (as the Miami Herald's Mary Ellen Klas ably points out) is not actually constitutional right now. So even if the Crist plan were a good idea, it couldn't get implemented for several years.
Davis' plan has flaws of its own. It too would leave the Save Our Homes plan in place. Its across-the-board tax-cutting approach basically asserts that everyone in the state needs a property tax break and that no individual group is any more "needy" than the rest. And both of these are at least contestable assertions.
Perhaps most troubling is that neither of these plans would add a much-needed measure of "ability to pay" to the state's property tax system. The ultimate injustice in the property tax is that it typically depends only on how much your home is worth and doesn't respond at all to changes in your income. So if your home's value goes up at the same time that you lose your job, you'll feel a lot poorer-- but the property tax will think you're getting richer and will tax you accordingly. Effective property tax reform figures out a way to ensure that when you're really poor, the property tax system recognizes your poverty.
If there's good news in these plans, it's that both candidates would move the state away from its historic over-reliance on local property taxes. But even here, there's bad news: in the long run, local revenues have to be replaced with something. Davis, at least, has made it clear that the state will pick up the slack from his $1 billion property tax cut, and has put forth a bold idea for raising the money: bringing back the intangible property tax the Florida legislature just finished repealing. At its peak, the intangibles tax (which was an annual property tax on stocks and bonds, and which has lately only applied to the wealthiest Floridians) did bring in close to a billion a year.
But bringing back the intangibles tax is almost certainly a political non-starter given that most of the legislature voted to get rid of it just this year. Of course, proposing an improbable revenue raiser is better than proposing nothing at all, which has been the approach of Crist so far. His property tax proposal (certainly more pricey than the $1 billion Davis wants to give back, although no firm price tag exists for the Crist plan) includes no offsetting tax hikes of any kind.
The bottom line? Neither candidate is taking the property tax bull by the horns: both would leave the Save our Homes initiative largely intact. What they're both doing-- proposing big tax cuts-- hardly requires much political courage. But Davis, at least, is showing enough backbone to discuss the hard part of fixing the state's property tax mess: coming up with a revenue source to pay for his tax cuts. It's a good place to start.
posted by Matt G @ 11:32 AM
4 comments
4 Comments:
So what will it take to get our politicians to really solve this problem?
It seems to me that a fair system would charge everyone a similar amount for the services provided - schools, police, etc. and it would somehow take into account one's ability to pay. The problem is that a property's current market value is a terrible way to establish the latter.
It seems there is little debate that the current system is absurdly broken. Next door neighbors receiving identical services, living in identical homes and earning similar salaries can and do pay grossly different property taxes. The system discourages buying a nicer home or even fixing up your own. For those that buy a new home (first or otherwise) there is a feeling of being screwed by a system that requires you to pay significantly more than your "fair share". The system is just not sustainable.
A truly fair system would have everyone paying a similar amount based on a fair valuation of the property. Perhaps with annual increases capped by an index that is directly tied to income.
The other (even more) absurd aspect of the current system is that it allows state coffers to increase as a function of real estate market values rather than the actual cost of services required. That's right, as property values go up and people move around, the state gets a windfall whether or not additional services are required!
We will only get there if we manage the "spend" side of the equation in a way that takes into account growth and increased services. And then raise or lower taxes evenly for everyone as needed to cover the cost of services, infrastructure and growth initiatives.
We are not going to get there with the current proposals from Crist or Davis - which are obviously designed to win votes or at least avoid losing any.
Perhaps a tax revolt, as suggested in today's Orlando Sentinnel, is what is needed ...Where do I sign up?
Perhaps this would help the lawmakers
Dear Governor Crist:
In regards to property taxes and exemptions, I would like to share my experience with you. I worked for the Property Appraiser’s office for over 23 years and have an understanding of how individual assessments, total taxable value and the budgets of taxing authorities effect millage rate.
Before taking any steps in establishing the $50,000 homestead exemption or portable homestead exemption, you may wish to have the Department of Revenue run a test using the 2006 property tax rolls of each county to compute the effects of the changes on individual tax bills. At that point, you can then group properties by use and value ranges for further study. The point is to know where the tax burden will shift and what effect will the shift in the tax burden have on Florida as a whole.
I am not clear on the proposal to extend the cap to business and rental properties. Would this shift the burden to vacant land? Also, due to the fact that Save Our Homes has been in effect for 10 plus years, business and rental properties would still be paying a much higher percentage of the total taxes.
As an employee of the Property Appraiser’s Office in the 1980’s when the homestead exemption was increased from $5,000 to $25,000, I had to answer questions from tax- payers, who voted for the increase in homestead exemption, received the exemption, but had higher property taxes than the year before even thought their taxable value was lower than the previous year. Of course, the answer was “total taxable value”. As value is taken off the tax roll through exemptions, caps or classifications, total taxable value increases and millage rates increase.
Florida needs property tax reform. Government does need to reduce spending and each taxpayer should be paying their share of the taxes. Florida statutes call for “fair and equitable assessments” that would have allowed each property owner to pay taxes based on the assessment of the property. Exemptions, classifications and caps have distorted that balance.
In the 21st century, we don’t have to go forward with tax reform and just hope it works.
We have the computing power now to calculate how these changes will affect individual taxpayers and the state as a whole.
I can only hope that you will take the time to research this matter carefully. The heroes of Florida are those that can find the way to provide services at a price that we can all afford.
Sincerely,
Penny Farrar
2655 Cherrywood Lane
Titusville, FL 32780
(321) 652-4509
pennycents@yahoo.com
Penny, thank you for a fair assesment of what needs to be done. We are relocating from California to Florida in a couple of weeks and although we have the funds to buy another home, we decided we would just rent because of the high property tax combined with expensive home owners insurance. If real estate taxes are lowered then we will buy a home there. If not, then we may just be passing through and will invest our money elsewhere.
M Nazzaro
San Diego
Most politicians have no interest in real tax reform. They are only interested in perpetuating their egos and power. Mayor Burkett in Surfside is an example of the worst kind of deceptive politician, the kind that harms rather than helps the chances for real tax reform.
Why on earth would Florida state officials want to reign in the over the top spending of local governments? Why would all taxpayers deserve to have their money saved by themselves rather than wasted by out of control local politicians? There are lots of examples. One can be found in Surfside, Florida, where there used to be outstanding government, but now there is the most wasteful, inefficient, incompetent government ever in the town's 70+ year history. This year they passed the most bloated, fat, wasteful, unproductive town budget ever, serving up a perfect reason for strong state imposed medicine to cure this growing disease.
Here's the factual background.
Surfside 1935: Local residents obtain state approval and create an independent municipality, the Town of Surfside, based on their desire to maintain a community with independence from Miami Beach and to have a small, accountable, and efficient local government to reflect the priorities and well being of its own residents. Over the 7 decades to follow, Surfside has its ups and downs, but generally does a superb job at serving its residents, remaining debt free, and being a widely recognized example for cities and towns and villages all over the nation.
Surfside 1990 - 1992: Mayor Eli Tourgeman enacts foolish budget policies with a 3-2 vote of his Town Commission that put the Town into the red, ending his term with town deficits. Tourgeman supports a number of major zoning variances and tries to break down the zoning code to get approval for a 20 story condo despite a height limit in the code of 12 stories. The voters turned back Tourgeman's approval in a referendum that defeated and reversed the condo project's variance approval. In 1990 he was elected mayor, in 1992 he was voted off of the commission when voters saw his real priorities and he came in last from a field of 10 candidates.
Surfside 1992 - 2004: Mayor Paul Novack and a new Town Commission unanimously enact budget corrections and fiscally responsible policies and every year for 12 years the town operated under balanced, stable and efficient budgets, with production of increased levels of town services, and numerous capital projects undertaken and completed that upgraded the parks, playgrounds, streets, drainage system, business district, Veterans Park, Town Hall, and much more, all with no debt, no bonds, and with the building of significant town surplus funds to serve the town's present and future. The town attracted a new Publix and many new restaurants and shops for the business district and made improvements and expansions to town parking facilities. Plans are made for a new town library and hi-tech information center to go on newly acquired property on the west side of Collins Avenue. The town was internationally recognized as a model community, and in 2003 Novack was honored as the state-wide "Community Steward of the Year" in Tallahassee. Mayor Novack was elected by the voters six times to serve as mayor, not one variance for height or density or setbacks or uses were ever approved during his tenure, and he retired from office in 2004 with official tributes from the Florida House of Representatives, the United States Congressional Record, and many others.
Surfside 2004 - 2006: Mayor Tim Will and a new Town Commission operate the town carefully and responsibly with balanced budgets, continued expansion of town surplus funds, obtaining a grant to help pay for the new library project, and making plans for the renovation and upgrading of the Community Center. The project would have made vast improvements to the facilities and would not have involved any closure or reduction in use by residents. There was no debt, no bonds, and yet there were even further enhancements of many town services. The town was honored by statewide organizations for superb levels of municipal accounting and auditing and outstanding transparency and performance with public funds. After several productive terms on the Town Commission, and service on the Town's Planning and Zoning Board, and a term as Mayor, Mayor Will retired from public service.
Surfside 2006 - 2007: Mayor Charles Burkett and a new Town Commission spurs, devises, creates and presides over a new town budget that is the largest and by far the most expensive and bloated budget in the town's history, spending more on lawyers than ever, needlessly paying millions of dollars of town funds to "settle" dubious law suits that objective outside reviews found had no merit at all with payments made to the claimants (Burkett campaign supporters) just before Courts were set to rule in the Town's favor, spending over $300,000 on a town charette to document Burkett's plans to change zoning laws and other pre-conceived notions for the benefit of non-resident commercial interests, hired a large law firm for a minimum annual fee of $600,000, no town projects or improved service levels, serious draining of town surplus funds, hired many new consultants with large fees paid by the town, and initiated plans for a public relations campaign to approve putting the town into deep debt with bond issues for as much as $50 million to substantially raise tax burdens on residents for many years to come. The town newsletter is expanded to include political attacks and misinformation every month at a cost of approximately $100,000 in taxpayers' funds for the one year alone. No projects are undertaken, and the community center pool is closed on a ruse after a pool pump has a minor short that the town fails to repair or replace. During his first year in office many respected town employees leave Surfside including its Police Chief, Town Engineer, Town Comptroller, Tourist Director, Public Works Director, and others, all of whom are replaced with "old friends" and campaign workers of Mayor Burkett. Burkett refuses to release his financial disclosure documents from court cases and his membership on City of Miami Beach boards and committees. Information surfaces that indicates he is really a resident of Miami Beach despite owning a house (one of his many, many properties in Florida) in Surfside. Mayor Burkett seeks to contract out services such as fire service, sanitation services, police services, and administrative services to the City of Miami Beach and private companies. His first year in office ends with a disastrous record of misfeasance, a vastly inflated town budget, and negative results for the community.
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