House to ask voters to trade property tax for more sales tax

[pgurney]

Anyone see this? What do you guys think about it?
http://www1.wsvn.com/news/articles/local/MI40248/

TALLAHASSEE, Fla. (AP) -- Florida homeowners could see their property tax bills drop by nearly 20 percent this year under a House plan released Wednesday that would also give voters the option of abolishing the property tax on primary homes, trading it for higher sales taxes.

The proposal would also cap the amount local government tax collections could grow each year unless local elected officials unanimously agree to raise more.

House Speaker Marco Rubio unveiled the proposal, which calls for a special election later this year in which voters would be asked to eliminate all property taxes on homestead property -- the primary residence on which a person has a homestead exemption. Taxes would still be paid on vacation or second homes.

If voters approve the elimination of the property tax, the state sales tax would be increased to 8.5 percent from 6 percent. That's aimed at helping local governments absorb the impact of losing property tax revenue.

More at link.

[Smiling JOe]

I've been hearing about this. One problem is that the cap is not really a cap since it can be raised.

I'm wondering if the current Mayor of Panama City will be able to have both of her homesteaded properties be tax free... She has had homestead on two houses for over 15 years and is only recently being busted for it.

With all of the "unfair" comments on the current Save Our Homes Act, I think many out of state owners will have much more complaining to add to their lists of complaints regarding the property tax situation in Florida.

[Beachlover2]

This will not help the RE market - Second homeowners and investers will not like being the ones to pay the bill.

[TooFarTampa]

This will not help the RE market - Second homeowners and investers will not like being the ones to pay the bill.

It may not be great for many SoWal buyers, but it sure would kick-start the RE market statewide. Guaranteed.

There are many thousands of residents who would love to upsize or downsize but feel trapped in their homes thanks to the Save Our Homes cap. The flaws in that well-intentioned law have been exposed by the RE runup of recent years.

The sales tax proposal is much more intriguing than the Crist camp's "Save our Homes portability" proposal, which would only increase the inequities in the tax laws.

-- While sales taxes are usually regressive, this may not hurt the lower income renters too much, since their rents have been climbing thanks to the landlords' higher tax bills. The House is talking about extending the initial 20 percent rollback to non-homesteaded properties like rental homes and vacation homes, so in reality the renters may not be affected that much, and SoWal non-homesteaders will benefit, at least a little.

-- As for SoWallers in the long run, that remains to be seen, but keep in mind SoWallers are NOT subject to the higher millage rates in incorporated areas. Millage rates in Tampa and St. Petersburg for example are in the 26-28 range, where in Walton County it is under 10. Taxes really are more affordable in SoWal than many parts of the state.

-- It may hurt some of the fixed income retiree homeowners, since their paltry property tax bills will be eliminated and sales taxes will go up. However they are not usually big consumers so most of them may actually benefit.

-- Those residents with middling tax bills will benefit, and those with the highest tax bills will benefit a LOT. Though the higher-tax-bill people will lose a very large federal income tax deduction, and their income taxes will go up accordingly. How much extra money would the feds get? I am wondering.

-- Tourists will complain but come anyway.

-- Businesses might be hurt the most. They started complaining loudly yesterday. Unless they are protected in some way, this proposal probably won't have legs simply because the businesses could be hurt so badly.

-- If everyone is protected, that means a huge spending cut for most or many governments, and what exactly will happen to services?

At the very least it shows the Legislature is considering all changes, no matter how radical. My guess is they will end up doing something drastic that will really help the RE market.

Prediction: House and Senate roll back all property taxes by 20 percent or so, then institute an inflation-adjusted spending cap. It would help everyone.

[Geo]

I'd like to hear from folks who have their primary residence in FL. I recently moved to Santa Rosa (full time) and would benefit from this. My impulsive thought is that I would be in favor but I would like to hear more from the other side...

Pls give me something more than-

"Visitors or second home owners don't want to pay for the homesteaders' property."

Has this been done elsewhere? How did it go? What was the impact? Were the expected benefits recognized? Were there unexpected consequences?

I think I am in favor but would love to see some intelligent debate here to help me finalize my opinion...

Cheers,
G

[TooFarTampa]

I'd like to hear from folks who have their primary residence in FL. I recently moved to Santa Rosa (full time) and would benefit from this. My impulsive thought is that I would be in favor but I would like to hear more from the other side...

Pls give me something more than-

"Visitors or second home owners don't want to pay for the homesteaders' property."

Has this been done elsewhere? How did it go? What was the impact? Were the expected benefits recognized? Were there unexpected consequences?

I think I am in favor but would love to see some intelligent debate here to help me finalize my opinion...

Cheers,
G

Geowickey how big of you to try to see the other side. Most homesteaders are jumping up and down with glee.

I think this is kind of radical. I don't think it has been done before and the numbers have not been crunched enough yet. How much of the tax burden would fall on the cities and counties (ie shortfall of funds), how much would fall to the tourists, and how much would fall to the non-homesteaders remains to be seen, from what I have read.

I have read that other states who have higher sales taxes and lower property taxes also have state income taxes, which we don't here (a sacred cow btw).

This definitely would require a constitutional amendment, and it could go on the ballot as early as this fall. It's too early to try to finalize an opinion ...

[Smiling JOe]

One thing I like about this idea is that all of the cheap plastic crap which is purchased here will be partially paying for homesteaded property taxes.

A while back, I said that we can expect more second homeonwers to "move" to Florida as their choice for homestead. I think we will see this happen if this new tax idea is approved. It sure will be helpful in keeping those 1,000 people per day, moving to Florida. This would be a big draw for those baby boomers already thinking about warmer sunny days. Since we don't have sales taxes on groceries, I think this idea could be very popular among those who are on fixed income. It is more like a spending tax. That is also the downside, that people might be less likely to purchase consumer goods. With only a 2.5 cent increase per dollar, it most likely wouldn't affect many people's decision to purchase items, but if the cap can keep being raised, we might eventually hit a point where it is affected. I doubt it will affect tourists' decision to purchase, those are the people who put the meat on the table for Florida.

I believe that with time, it will be very difficult to find employees to staff the businesses in our area. It is already rather difficult. This could be one saving grace to help keep people here to staff the services and businesses upon which we rely. However, it is true that many of those people cannot afford to live here anyway if they do not already own, but for those who have owned, it will be a welcome relief, and maybe the one thing that keeps them here.

[ShallowsNole]

I don't like this idea at all. What I have heard is that a 2.5% increase in the state sales tax would only reduce property tax, specifically the portion appropriated to schools. To scrap property tax completely, the state sales tax would need to go to at least 13.5%. At least, that's what the articles I read two days ago said.

The proponents of this plan appear to have forgotten that there are certain taxes that by law piggy-back the state sales tax. For example, a 8.5% state sales tax rate becomes 9.5% in Walton County, due to the 1% local option surtax.

Worse yet (listen closely, rental owners) is that a visitor to our area will pay 8.5% + 1% + 4% = 13.5% tax to stay in a transient rental accommodation. Currently, there are a couple of other areas in the state in which the total is 14 to 15%, and their tourism doesn't appear to be hurting, but I am not certain how well 13.5% would set with our visitors. Now...if the base state sales tax goes to 13.5%, the total lodging taxes go to 18.5% . Folks will still come, but I foresee shorter stays...and over time, total revenues will decrease. Also, there would definitely be an impetus for less-than-honest rental managers to circumvent the tax (it happens too frequently as it is!)

Florida will be known as the state that shot the golden goose. And once you do something as drastic as this, you can't undo it.

[TheSheep]

Ah, yes, another regressive tax, fairness and equality for none.

[Joefromseagrove]

Believe it or not, there are actually working class people in Florida. Since Floridians spend on average 40% of their income on taxable items. Equal to about 2500 dollars per household, an increase on the sales tax impacts these people. Perhaps a low-income sales tax credit could level the field a bit.

[TheSheep]

Believe it or not, there are actually working class people in Florida. Since Floridians spend on average 40% of their income on taxable items. Equal to about 2500 dollars per household, an increase on the sales tax impacts these people. Perhaps a low-income sales tax credit could level the field a bit.

What would level the tax field is a kinder assessment of who can pay what and assess accordingly.

[Smiling JOe]

The Bay County Property Assessor is suggesting an easy solution of assessing all property at 40% of market value rather than the required 85%, which would bring immediate relief to all property owners in Florida. Mark my words, if something isn't done to correct the tax issue this year, there will be a tax revolt. If the market value of properties drops 35% from the 2005 values, the increase in millage rates will go up tremendously to keep the total revenue at the same levels for the County.

[6thGen]

What would level the tax field is a kinder assessment of who can pay what and assess accordingly.

"From each according to his abilities, to each according to his needs."

What is hard to understand about economic incentives?

[pmd8]

Even though replacing my property tax with a sales tax would greatly benefit me, I oppose it. Someone with a home appraised at a million or so who now pays about $25,000 in property taxes would have to spend a $500,000 dollars a year with the additional 2% sales tax to offset the loss of property taxes.

Business owners would pay a disproportionate amount of taxes.

Wouldn't it be fairer to reduce the millage rates across the board?

[seacrestkristi]

This will not help the RE market - Second homeowners and investers will not like being the ones to pay the bill.

We already are paying the bill. I think it would help. I don't want to charge renters (the very few I have being across the street from the beach w/ no pool) any more than I already am.11.5%! Our property tax went from $750-$2300/year in 6 or 7 years! Where are they charging 14%? And insurance woohoowee! They charged so much we just got a refund check from the insurance co. being reviewed by the state!

[Joe]

Wouldn't it be fairer to reduce the millage rates across the board?

I disagree that reducing the millage rate will solve the problem. The real problem lies in the assessments and not the millage rate. The "Slaves of our homes" constitutional amendment has created enormous disparities in the assessments. The millage rate has gone down in WaltonCounty and mostly benefited those who have been homesteaded for a long time.

Rolling back assessments to year 2000 levels would create a more equitable system.

[John R]

Rolling back assessments to year 2000 levels would create a more equitable system.

now that i could live with.

[Bob]

I suspect the one thing that needs to be done is the most fair. The elimination of SOH would end the debate of inequality, and local governments would be held to more scrutiny regarding the collection of taxes and spending.

[Joe]

Eliminating SOH is difficult because it must be done by the voters and not the legislature. On top of that it would require more than a 60% vote. The only way I can see voters eliminating SOH is if they are voting to completely eliminate their property taxes.

[Smiling JOe]

I disagree that reducing the millage rate will solve the problem. The real problem lies in the assessments and not the millage rate. The "Slaves of our homes" constitutional amendment has created enormous disparities in the assessments. The millage rate has gone down in WaltonCounty and mostly benefited those who have been homesteaded for a long time.

Rolling back assessments to year 2000 levels would create a more equitable system.

Joe, I am not sure that I follow you point of the problem lying in the assessments rather than the millage rate. Will you please share some examples of how you think this to be true? If the millage rate is decrease substantially, and assessments remained at 85% wouldn't the effect be the same, or am I missing something?

Also, how did the decrease of somewhere around 1 mill benefit those people who have been homesteaded for a long time. I understand that the Save Our Homes Act has benefited these people greatly, but since their assessed values were capped long ago as for increases, 1 mill doesn't really add up to much. My thought was that it gave more benefit to the people who do not have homesteaded property.

Example - Property #1
homesteaded property from 1990 - Assessed at $100,000
1 mill reduction = $100
total taxes around 9 mills = $900


property #2 which is not homesteaded but adjacent to property #1
purchased in 2005 and assessed at $850,000 (just making up some realistic examples)
1 mill reduction = $850
total taxes around 9 mills = $7650

In the above examples, you can see the inequity caused by the Save Our Homes Act, which Joe and others mention. However, a millage reduction appears to benefit the non-homesteaded property owner more than the homesteader who purchased long ago.

[Joe]

In your example, lowering the millage rate still makes the non-homesteader/recent purchaser pay 8.5 times the taxes of their neighbor.

I think it is more important that the non-homesteaders tax bill NOT BE 8.5 times higher than the homesteader. Likewise, I think it is vital that a homesteader who purchased yesterday not pay 8.5 times more in taxes than their long-time homesteaded neighbor.

So let's say the property values are rolled back to 2001 levels. Perhaps the $850K house is now valued at $350K. The homesteaders house is still appraised below the market value since they were homesteaded since 1990 so theirs doesn't change. The homesteader keeps paying the same amount. The taxes of a non-homesteader or a homesteader who purchased recently go from $7650 to $3150 which is now 3.5 times the homesteaders. The non-homesteader/recent purchaser no longer carries such an extreme amount of the tax burden and sees a significant tax relief.

It seems to me that people homesteaded for a long time are not complaining unless they desire to move, hence the name Slaves of Our Homes. In many cases these people have seen their total tax liability descrease in the past few years. This is true only in those counties such as Walton that have lowered their millage rates in the past few years. The complaints are coming from those who purchased recently and those who don't qualify for homesteading.

Any fix is complicated and I hope more comes of this tax issue than did the fix to the insurance woes.

[Bob]

SOH is unlikely to ever go away unless it's constitutionality is successfully challenged. It seems whatever fix is served up will create more niche inequalities. Logically, it would be perfect to eliminate SOH, and address the issue for which it was created....the protection of senior citizens on fixed incomes. Seniors could be "grandfathered" and newbies hitting the age of 65 could recieve an additional 25,000 exemption, and every five years forward the exemption could gradually increase. This would help those of modest means and not allow the Jimmy Buffets of Florida to skate paying tens of thousands in real estate taxes they could easily afford.

[TooFarTampa]

SOH is unlikely to ever go away unless it's constitutionality is successfully challenged. It seems whatever fix is served up will create more niche inequalities. Logically, it would be perfect to eliminate SOH, and address the issue for which it was created....the protection of senior citizens on fixed incomes. Seniors could be "grandfathered" and newbies hitting the age of 65 could recieve an additional 25,000 exemption, and every five years forward the exemption could gradually increase. This would help those of modest means and not allow the Jimmy Buffets of Florida to skate paying tens of thousands in real estate taxes they could easily afford.

Yes and I'm wondering why nobody is talking about this. Dumping the SOH cap for everybody but the seniors (or increasing homestead exemption at age 65) makes so much more sense. Everybody else could have the homestead exemption.

If, in addition to lifting the cap for everyone but seniors, they could roll back the property taxes to 2000 or 2001 levels, and cap government spending at 3 or 4 percent increases a year, that would go a long way to making things a lot more fair. Yup, those people who have been homesteaded for 15 years (like my neighbors across the street) would end up paying more in taxes, but they have been getting a break a loooong time, and they know it. Those people aged 55-65 would probably be hurt the most, but if they are taxed at 2000 or 2001 levels the pain of adjustment would not be so great.

[Joe]

This is interesting....

Group sues over Save Our Homes
Owners of second homes ask judge to stop assessment cap
http://www.tallahassee.com/apps/pbcs...NEWS/702270324

[pmd8]

[COLOR=black] The real problem lies in the assessments and not the millage rate.

Currently the county property appraisers are required by law to reassess every so often. They have to look at comparable sales nearby. The local assessors are actually quite sympathetic in general. My non-homesteaded properties are under-assessed for now. I'm holding my breath until the next time they reassess.

[Smiling JOe]

Currently the county property appraisers are required by law to reassess every so often. They have to look at comparable sales nearby. The local assessors are actually quite sympathetic in general. My non-homesteaded properties are under-assessed for now. I'm holding my breath until the next time they reassess.

To my knowledge, the Property Appraisers are also required to assess at 85% of the market value.

Already mentioned on this thread is one of the most alarming things -- not many people are talking about restricting the Gov't spending, and that is the one thing that drives these taxes. Property values increased greatly from 2004 to 2005, yet we received a reduction in taxes of around 1 mill. So, the County revenues probably doubled. Where is all of that money being spent, and does anyone believe that the County Gov't will cut that back to down? All of this talk about how to fix the inequities in the system still does not solve the problem of the gov't not having restrictions on spending habits. We can reduce the assessed value to 40% of the market value as the Bay Co Property Assessor recommends, but the County will not go for the 47% reduction in tax revenues, so they will have to increase the millage rate accordingly, in order to keep the spending at a the elevated mark which it currently has. For the offset, we would be looking at a millage rate increase up to around 14 mills, rather than the 9 mills.

[Joe]

I agree 100% that counties are spending too much. Any solution must include some sort of caps that line up spending with population growth and inflation.

I find it interesting that when the Florida Supreme Court originally approved the wording for the SOH amendment in 1992, 3 of the 4 justices dissented and said it violated the "equal protection" clause. The class action lawsuit may very well have some merit.

[Rambunkscious]

Yes, the county budgets are the problem. I was told last Friday that in 2005 Okaloosa County had a 12% population increase yet the actual county expenditures went up 83% for 2005. ( Okaloosa County is the county adjacent to Walton County on the west).

You would think the counties would be a little sensitive here and if the values double, the millage would halve.

Apparently, however, this extra funding that the counties have began to receive in the last 2 or 3 years has only whetted their appetite for more, more, more. It would be interesting to hear their side of this story.

On the insurance side of the story, a sweet and simple answer to that problem is to let Citizens write all the homeowner business in the state; tell the other insurance companies to go home. This would cause our premiums to go way down because no profit would be realized. However, this is a very political situation, hence our politicians are not likely to agree to this.

[SHELLY]

Palm Beach County rejects recommendation for no budget increases

By Josh Hafenbrack
Sun-Sentinel.com
Posted February 27 2007, 7:03 PM EST


Turning back a wave of residents clamoring for slimmed-down county spending, Palm Beach County commissioners on Tuesday rejected a recommendation that they hold the line on the budget and slammed their own advisory committee for making the suggestion.

Residents told commissioners that because county spending has spiraled in recent years, property taxes are forcing people from their homes and stifling the real estate market.

Commissioners were defensive, quarreling with speakers and blaming state legislators for passing down unfunded mandates. Commissioners unloaded on the Budget Advisory Committee chaired by Commissioner Warren Newell, threatening to replace board members they appointed just months ago unless the committee changes its focus.

Of the 16 percent increase in county property taxes this year, resident Virginia Brooks noted: "That's nearly triple the combination of population growth and inflation, and almost double the growth in personal income. I think the solution might be, just like any good household would do, a belt tightening."

Commissioners rejected the budget committee's recommendation to keep 2008 spending to this year's $4.3 billion level.

The commission formed the advisory committee less than three months ago in response to a growing outcry over increases in county spending. On Tuesday, commissioners said the committee should focus on specific programs and county expenses, rather than making broad suggestions. Commissioners each appointed one person to the seven-member budget committee, save for Newell.

"Just telling us, 'Go cut,' I think we need to be more specific," said Commissioner Karen Marcus. "If they don't want to do that, we need to put new members on there."

Commission Chairman Addie Greene took it a step further.

"Why do we need this committee?" she asked. "It's my personal opinion it's a waste of time."

About a dozen residents spoke on the spending issue, all hammering home the same theme: county spending is out of control, leading to crippling property tax bills for anyone without a longtime homestead exemption.

Many more showed up, but not everyone spoke because commissioners broke the property tax session into two parts.

The issue came up before 10:30 a.m., but commissioners moved onto another agenda item less than an hour later and didn't take the budget recommendation back up until after 3 p.m.

One woman wore a T-shirt that said, "Taxation Without Representation is Tyranny," referring to seasonal residents who have borne the brunt of increased government spending.

Others complained that commissioners were being bullies for lecturing speakers on why county spending has gone up. "I resent some of the arrogance that comes across sometimes," said James Grice, 51, of Wellington.

"We'll try and work on that," responded Commissioner Jeff Koons.

David Wood noted that when 500 residents packed a legislative hearing on property taxes this month at Palm Beach Community College, no commissioners showed up. "Hundreds of citizens were there who had questions for all of you, and none of you were there," he said.

Christina Pearce, a Realtor, zeroed in on the county reserves, noting the $2.3 billion the county has in its investment portfolio. That money includes not only the budget reserves, but also money to pay for future parks, projects and roads.

"I think I speak for everybody when I say that seems to be a lot of money," she said. "I know it might be designated for this project or that. But what we're saying is, there has to be some money that can be used to offset property taxes."

Property taxes are the Legislature's top concern for the spring session. Among the proposals is a plan to roll back county spending to the pre-real estate boom levels of 2001 and replace homestead property taxes with a 2.5 percent increase in sales taxes.

"It looks like the state is finally going to make you guys prioritize your spending," said resident John Early, who ticked off county cost-saving measures from a hiring freeze to 10 percent department budget cuts. "From what I'm reading, you're going to really have to cut back a lot."

Representing a consortium of condo communities in Boynton Beach, snowbird Dory Kilburn said her taxes shot up 70 percent in one year and many of her neighbors are being forced from their homes by taxes.

"When you raises taxes in Palm Beach, we pay," she said. "We're asking you not just to freeze the budget, but… try to find some ways to save money, because our communities are not going to survive if you keep raising the taxes."

In their discussion, commissioners focused on the Budget Advisory Committee itself, lamenting that the board didn't identify specific areas the county should cut.

"Commissioner Marcus, I think you're right on track," Commissioner Burt Aaronson said when Marcus threatened to find new board members. "The fact is, I don't think they've fulfilled their mission."

Newell also criticized the committee he chairs, despite having supported its budget recommendation at the committee hearing. He said a lot of politics has infiltrated the group, later explaining it is influenced by the Economic Council of Palm Beach County, which has battled the commission over its spending. That group's executive director, Mike Jones, said the commission was shortsighted to reject the idea of holding the line on county spending.

"I think it's a lot more generous than the Legislature might do," he said.

[Rambunkscious]

The arrogance of the Palm Beach County commissioners is appalling.

The county budget requirements exceed the ad volorem taxation value so some new method of meeting the county budget requirements needs to be found.

When county governments are so insensitive to their constituents needs,
and keep in mind the property owners are getting killed on many sides,
(taxes, insurance, unable to sell their properties) the county commissioners should be replaced.

[Smiling JOe]

The arrogance of the Palm Beach County commissioners is appalling.

The county budget requirements exceed the ad volorem taxation value so some new method of meeting the county budget requirements needs to be found.

When county governments are so insensitive to their constituents needs,
and keep in mind the property owners are getting killed on many sides,
(taxes, insurance, unable to sell their properties) the county commissioners should be replaced.

Look for a tax rebellion in Walton County this year when either the Prop Appraiser doesn't lower the assessed values or when the County Commissioners raise the millage by 40% if the assessed values are reduced. Get ready, because one of the two things, or some combination of the two, will happen this tax year.