Property Tax Update - June 2007

Two years ago, this column discussed the problem of the broken property tax system in the State of Florida. I detailed how those benefiting from the 1992 Save Our Homes Amendment were the lucky “haves” while those who had purchased their homes in the past few years were the “have nots”.

I suggested that the inequitable property tax system would potentially scare off potential buyers and trap the “haves” in their homes. Unfortunately my prediction was worsened by climbing property insurance rates and by a tighter credit market. Today, the housing market is stagnant. I believe high property taxes continue to be the major problem as buyers wait for reduced taxes before purchasing properties.

The fact that we are again writing about this topic means that our elected officials in Tallahassee failed to do their job. Our new Governor has shown no leadership other than offering such prophetic advice as “taxes should drop like a rock”. We need him to lead and not just offer sound bites. And our county and local government officials have been too busy hiring lobbyists to protect their bloated budgets which they claim serve so many necessary needs.

When I moved in 2004 after having lived in my previous home for more than a decade, my property taxes increased by 400% yet the square footage of my home only doubled. This brings me to my suggestion as to how to revamp our property tax system.

My suggestion is based on a simple premise. Theoretically, larger homes require more government services than smaller homes. So they should pay more based on their square footage. Currently, new homeowners in expensive two bedroom condos on the beach pay more in property taxes than some of the long time homeowners in the large six bedroom custom home developments of Davie and Weston protected by Save Our Homes caps.

So instead of silly plans to completely scrap the property tax and replace it with a higher state sales tax, or just increasing the homestead exemption, I suggest that homes and condos be primarily taxed based on their square footage. But I would also continue to tax their market values on a progressive tiered basis because doing so ensures that those with the highest priced homes still pay an appropriate share of taxes regardless of size. I would also continue to allow homestead exemptions for seniors only.

Thus, your property tax bills would show separate lines items for a square footage tax and for a property value tax. The actual tax rates for each would be dependent on the revenues needed to fund the county, city and town, special taxing districts, and school board. And therein lies the biggest issue. How much money do our governing entities really need? What are necessary services versus those items better funded by user fees?

I agree with the majority of Florida House members that the revenue needed should be rolled back to the early years of this decade before spending got out of control with the added funds from skyrocketing home values. I would suggest 2002 as the base year with adjustments made for inflation and other realistic cost of living increases since then. Thereafter rate increases should be capped based on inflation.

But I believe that the legislature should also allow the county and local governments to empower their voters to bypass the inflationary cap and increase the property tax rates for residential properties in their areas as high as their local voters will allow in special referendums in order to fund services which voters agree are necessary for their areas but cannot be adequately funded by the rolled back or subsequently capped tax revenues.

Property tax reform for commercial properties must also be addressed this year with rolled back bills. Small businesses which own their own buildings are being squeezed by higher property taxes while also dealing with higher employee healthcare costs and skyrocketing commercial property insurance. And larger property owners usually pass along property taxes to their tenants who in turn usually raise prices for their products and services which ends up affecting us all.

Lastly, and perhaps most importantly, property taxes for multi-family rental properties need to be slashed if our county and state are going to meet the need for affordable housing. Such tax reduction legislation, however, will have to require that those rental property owners reduce overall rental income dollar for dollar for any reduction in property taxes.

I urge each of you to contact your State Representatives and Senators to let them know that there is no more important issue for them to resolve this year than restructuring our property tax system.