Legislation ended their special session on Thursday with what sounds like a huge reduction in our property taxes, but wait. Is it is good as it was built up to be? It could be if everything goes as planned and people vote out the Save Our Homes amendment. We are going to see a rollback of between 7% and 9% initially and the big reduction will be seen in the planned super exemption.
I have to applaud our legislatures for all the hard work they have put in. It has and continues to be a very heated battle between city and state government. This is not over yet. Only time will tell what the true outcome will be. If the super exemption for homesteaded properties, it could mean a reduction by around 40% in property taxes for the typical homeowner. But what about non-homesteaded properties? They have been carrying a brunt of the tax burden. The plan doesn't really do much for them.
I think that the legislation is going to first tackle getting rid of the Save Our Homes, which is a constitutional amendment. They will need a 60% vote by the people this January. Once the Save Our Homes is eliminated they can then figure out how to make whole for the non-homesteaded property owners. I don't think a majority of the voters (homesteaded property owners) are willing to do anything to help the investors and second home owners (non-homesteaded owners). I think they are missing the big picture however. They are hurting all the business owners and the property owners that are renting to our lower income residents who can't afford to purchase homes. The business owners bring goods and service to our residents. We need local business to survive. You really have to look at the big picture.
We are making steps in the right direction. We have to be happy that we are getting some relief and we should get it on this year's tax bill. You can't have it all.
I have copied an email sent out by Florida Tax Watch. This is the best explanation for the plan and all its details. Please read below.
3rd (and Final) Day of Special Session:
Legislature Passes Property Tax Cut and Cap, Constitutional Amendment to Create "Super Homestead" Exemption Will Go to Florida Voters on January 29, 2008
The Florida Legislature had a nine-day Special Session to pass property tax relief and reform but it took only three days to do it. The three bills that comprised the Speaker and President's plan passed both chambers today. The session officially ended at 6:27 p.m.
Therefore:
Barring overrides by individual local governments, every taxpayer in the state will see a tax cut reflected in their next property tax bills. The average cut is expected to be about 7%.
There will also be a cap on future property tax growth (except school taxes) that will limit it to the growth of new construction and per capita personal income.
On January 29, 2008, Florida voters will consider a proposed constitutional amendment to create a new homestead exemption ranging from $50,000 to $195,000. This exemption is designed to replace the current homestead exemption and gradually replace Save Our Homes. If voters pass it, homeowners can decide if they want to have the new exemption or keep their current Save Our Homes assessment cap. When a homeowner moves, they will lose SOH and get the new exemption. New homeowners will get the new exemption.
The amendment also provides a $25,000 exemption for tangible personal property taxes paid by businesses (worth about $500 in taxes) and allows the legislature to provide additional relief to affordable housing and "working waterfronts."
The plan is certainly far from perfect, but it is an improvement over the current system. It should have better targeted relief to those who have been hurt the most during the run-up in taxes, but it does embody several of the principles and results promoted by Florida TaxWatch recommendations.
The cap of future property tax growth has been long overdue. The new exemption will address many of the inequities that exist among homestead properties. First time homeowners will get relief. The plan provides a measure of portability. People will no longer have to face being taxed at full value when they move.
A perhaps the most importation result, from a tax reform perspective, is that this marks the beginning of the end for Save Our Homes and its tax shifting to business, renters and non-homestead residences, new homebuyers and people who move. Because homeowners get the new exemption when they move, Save Our Homes will eventually go away. Florida TaxWatch has continually said that the elimination of SOH was critical to true long-term reform, but that it should be done without increasing taxes on homeowners and making sure they are protected from rapid tax growth. This plan accomplishes that.
The plan was amended today to allow taxpayers to choose Save Our Homes or the new exemption, instead of automatically getting the exemption that saved they most money, will slow the phase-out of SOH. It should, however, make the proposed constitutional amendment more attractive to voters.
The tangible personal property amendment has been a long-time recommendation of Florida TaxWatch.
While the amendment should, through the phase-out of Save Our Homes, reduce the tax burden shift to non-homestead properties. However, several provisions have the potential to still shift tax burden. The new exemption would apply to school levies and the Legislature has pledged to "hold schools harmless." However, if they do that by simply increasing Required Local Effort property taxes, most of the non-homestead savings will be erased. The Legislature should have applied the same cap it put on local government to its own setting of school taxes.
The plan contains an important provision to avoid additional tax shifting. In the year the new exemption takes effect, the maximum millage rate calculation is adjusted to prohibit local governments from adjusting millage rates to recoup the taxes lost. This assures it's a true cut and not just a shift of burden to non-homestead properties.
However, if local governments override the cut through a two-thirds vote of the governing body, this will create a tax shift.omH
Lastly, the plan does nothing to limit other local taxes and fees, which local governments have been increasingly using and will likely use even more to replace property tax revenue.
Plan Details
Statutory Tax Cut
Cities, counties and special districts are required to cut next year's property taxes by 3%-9% from the "rolled back rate" (meaning the amount levied this year plus new construction.). School district levies are exempt from the cuts.
The cut will be 3%, 5%, 7% or 9%, depending on how fast per capita taxes have risen over the last five years in each jurisdiction. The faster a government's taxes have risen, the higher the cut.
Fiscally limited counties and cities and independent special districts will be cut 3%. So will municipal service taxing units (MSTUs) and dependent districts that provide emergency medical or fire protection services.
Jurisdictions that have not levied property taxes for at least five years are not subject to the cut.
The cut does not apply to certain voted levies.
The cut may be overridden:
To exceed the cut level up to the 2006-07 level requires a 2/3 vote of the governing board.
To go up to the level of taxes raised by 2006-07 rates requires a unanimous vote or a three-fourths vote if the body has nine our more members.
Above this requires voter approval.
Statutory Tax Cap
After 2009, growth in property taxes for each jurisdiction cannot exceed the growth of new construction and per capita personal income (currently about 4%-5%.)
The cap does not apply to school taxes.
Can be overridden up to 10% over the cap by a 2/3 vote of the governing board. Above this requires unanimous vote of board or a referendum.
Constitutional Amendment
This proposed constitutional amendment would create a super-homestead exemption to replace the current homestead exemption and Save Our Homes. The exemption would be 75% of the first $200,000 in value and 15% of the next $300,000. The maximum exemption would be $195,000 and the minimum would be $50,000 ($100,000 for low-income seniors.)
Homesteaders will be able to make an irrevocable, one-time decision to take the new exemption or keep the current Save Our Homes cap. If they move, they will get the new exemption.
The new exemption will apply to school district levies.
In order to not allow local governments to increase tax rates to offset the new exemption, a cap adjustment will be in place for 2008-09. This is important because this will keep the tax burden from simply being shifted to non-homestead properties.
This too may be overridden. To recover up to 2/3 of the revenue loss requires a 2/3 vote of the governing body. To exceed that level requires a unanimous vote or a referendum. If local governments do this override, taxes will be shifted to non-homestead properties.
This special cap does not apply to school taxes. Because of this, if the Legislature increases Required Local Effort in order to not cut school funding, a significant tax shift to non-homesteads will occur. This should be prohibited and instead the state should be required to re-direct other state revenues to fully fund schools.
It mandates at least a $25,000 exemption for tangible personal property taxes paid by business. This is worth about $500 per business.
It allows the Legislature to enact general law to assess affordable housing and "working waterfronts" at less than just value.
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Florida TaxWatch is a statewide, non-profit, non-partisan research institute that over its 28 year history has become widely recognized as the watchdog of citizens' hard-earned tax dollars. Its mission is to provide the citizens of Florida and public officials with high quality, independent research and education on government revenues, expenditures, taxation, public policies and programs and to increase the productivity and accountability of Florida Government. On the web at www.FloridaTaxWatch.org.
It's a good life,
Ian Anderson
