OVERHAULING THE FLORIDA PROPERTY TAX SYSTEM
One of the hottest topics of debate this year in Florida is the subject of property taxes. Legislators are keenly aware that the property tax issue is of the highest priority for those owning property in Florida, as well as the issue of soaring property insurance costs in Florida.
This week, Republicans in the Florida legislature have suggested a proposal to eliminate property taxes for Florida residents owning a primary residence (those with homestead exemption). Furthermore, their proposed plan offers bold tax cuts for those owning a vacation or second home in Florida as well as Florida business owners (non-homesteaded property), with a proposal to roll back Florida property taxes to the 2001 millage rate level.
If such legislation gets through future votes by the full house and senate and then receives Governor Crist's endorsement, local governments throughout the state of Florida would experience lost revenue of drastic amounts to run their local governments. Early reports here in Nassau County estimate the potential lost funding, if such a proposal became law, may amount to a loss of $25 million to the county.
MAKING UP FOR MASSIVE LOSS OF FUNDS
Where would the lost revenues be made up? This particular tax proposal suggests increasing the Florida sales tax. According to their web site (see below), the plan would “provide funding for local government with an additional 2.5% state sales tax which is paid by Floridians and tourists.” How the calculations are done and the assurance that lost property tax revenues will balance out with new revenues from a higher statewide sales tax (so local governments around the state could continue to efficiently function), remains to be seen. Operating budget cuts for local governments around the state may be required, if this legislation passes in the future.
This past week, Florida's Governor Crist stated in his "State of the State" address, "The American dream of home ownership is being crushed under the weight of property taxes... “Declining school enrollment is evidence that Florida is becoming increasingly unaffordable for many.”
In his "State of the State" address, March 6, 2007, Governor Crist encouraged the Legislature to reduce property taxes by putting a constitutional amendment before voters this year. The Governor has recommended doubling the homestead exemption (from the current $25,000), making the Save Our Homes protection portable, and extending that protection to business and rental properties."
It’s still very early in the process, so whether Florida residents will no longer have to pay property taxes is still questionable, and just one of the possible tax remedies under discussion. What is evident at this point in the process is that legislators are trying to tackle the property tax issue and the current system’s inequities. Hopefully, the state government will come up with a palpable solution by the time the next tax bills show up in Florida property owner’s mailboxes (early November 2007), offering some relief to tax payers.
VISIT THE "NO MORE FLORIDA PROPERTY TAX" WEB SITE
Learn more about this hot topic and the Florida Republican plan by visiting the official web site. If you own property in Florida and wish to support a constitutional amendment to eliminate property taxes in Florida, you can express your view at the web site sponsored by the Republican Party of Florida, www.NoMorePropertyTax.com . There’s an online petition you can eMail to Tallahassee to support this particular tax relief effort. Also, the web site invites you to share your personal stories of tax burden.
MORE ABOUT HOW PROPERTY TAXES CURRENTLY WORK IN FLORIDA
If you are thinking about buying property in Florida, and are not familiar with the current property tax system, read on.
New property tax assessments for buyers of real estate in Florida are based on market values -- the recent sales price that is recorded when the sale closes. Recent sizzling real estate markets in Florida resulted in high appreciation rates of property. Newcomers to Florida seeking to purchase a home or condo are sometimes surprised at what their property tax bill will be (generally much higher than what the seller was paying).
People who live in the property as a primary residence get a benefit of the homestead exemption. Besides the $25,000 reduction of the tax valuation for a primary residence with a homestead exemption, homesteaded property taxes cannot go up more than 3% per year, which is a huge savings in times of soaring property values. It's important to note that second homes/vacation homes, investment properties and commercial property do not benefit from this tax cap or the homestead exemption. If the property is not a primary residence, then the 3% annual cap on tax bill increases year-to-year does not apply, so property taxes can go up at a higher rate (reflecting more realistic increases in property values, considering soaring real estate values in Florida area, especially during the years 2003 to 2006). Thus, there is an inequity in what Florida property owners pay for taxes, depending on status as a primary resident, or second home owner, investor, or business owner.
LOSING TAX BREAK IF YOU MOVE
Another problem of the current property tax system is for those Florida residents who wish to move within Florida. For people living in Florida who want to either upsize a home or downsize their primary residence, they are getting hit with a “moving tax,” so-to-speak, with the soaring property values of recent years. It’s become too expensive for many Florida residents with an existing “primary” residence, to move to another home. As noted above, The “Save Our Homes” legislation that was added to Florida’s constitution back in 1992, put limits on the annual assessed tax value of homes (a maximum of 3 percent change or the percentage change in the Consumer Price Index, whichever is LESS). So property owners with a “primary” residence in Florida have enjoyed property tax savings, since they are essentially being taxed at lower rates than fair market value of homes, if they haven’t moved in a few years.
Governor Crist has supported a change in tax law to allow Florida property owners of primary residences with a Homestead Exemption in place, who move within the state, to take their tax savings with them, dubbed “tax portability.” Any future changes in Florida property tax law will likely also address the “portability” issue.
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