The Florida Legislature "backed a property-tax reform package that is expected to save Florida taxpayers $31.6 billion over the next five years," on June 14, according to the Orlando Business Journal.
Floridians have been clamoring for politicians to overhaul the state's property tax system, which places a far heavier burden on some property owners than others, especially in light of the sharp increase in insurance costs as a result of the severe hurricane seasons of the last few years. Florida's Save Our Homes tax cap creates disparities such that two homeowners on the same street could face significantly different tax bills.
Aerial view of a residential area near Sunny Isles Beach, Fla.
The current property tax system puts new homeowners at a marked disadvantage. Someone who bought a home for $100,000 15 years ago would have seen gradual property tax increases, while someone who purchased a similar home three years ago would have paid $400,000 and faced far higher property taxes, according to the
Miami Herald.
That's because the Save Our Homes tax cap limits property tax growth to 3 percent a year for homestead exempt properties, no matter how much the market value of the property increases, while allowing local governments to reassess properties at market value at the time they are sold. Existing homeowners are eligible to receive the homestead exemption.
According to the Florida Department of Revenue, "Every person who has legal or equitable title to real property in the State of Florida and who resides on the property on January 1 and in good faith makes it his or her permanent home is eligible for a homestead exemption."
The prospect of high tax bills is keeping many potential investors and owners from purchasing homes in Florida, and has also made many who are already homeowners feel trapped in their current homes.
Florida collected $30.5 billion in property taxes in 2006, which is nearly twice the tax collected in 2000, according to the Wall Street Journal.
In the past six years, the average Floridian's property taxes rose 100 percent, while their personal income growth was limited to 44 percent, according to the Miami Herald.
While New Jersey, New York, Indiana, Montana and some other states have already slashed property taxes this year, Florida's proposed cut is by far the largest.
The first part of the $31.6 billion plan involves replacing the Save Our Homes 3 percent growth limit with a "super exemption" that would provide immediate tax cuts and limit future increases by placing a cap on city and county revenues. This $16 billion portion of the plan will go before voters in a special election Jan. 29, 2008.
"The second part, pegged at $15.6 billion, requires all cities and counties to roll back tax rates for the 2007-08 fiscal year to the previous year's levels," according to the Orlando Business Journal.
"All property owners should see an average 7 percent cut," according to the Pensacola News Journal. The proposed tax plan also includes additional tax relief for disabled veterans, low-income seniors and small business owners.
Crystal River, Fla.
While this reduction in property taxes would relieve many property owners, local governments dread a drop in what is for many their primary source of revenue because of Florida's lack of a personal income tax. Decreased property taxes could lead to reductions in services such as fire and police protection and recreation. Though the legislature promised to protect schools from the municipalities' reduction in funds, there is some skepticism about whether the state will actually make up the funds as promised.
On the other hand, according to the Wall Street Journal, putting money back into the pockets of property owners could stimulate Florida's economy, which is floundering in part because of the implosion of the housing market and the upcoming hurricane season. If the required 60 percent of voters approve the legislation in the special election, the subsequent tax cuts could reinvigorate Florida and its real estate values.
