On January 29, 2008, Floridians get to go to the polls and vote in the presidential primaries and for a constitutional amendment affecting property taxes known as Amendment #1. The amendment's language is a little convoluted and confusing. So I am going to do my best to give an unbiased breakdown on exactly what Amendment #1 is, what it will do, and the pros and cons about it.
You can read for yourself a sample ballot that includes the language for this amendment on the Seminole County Supervisor of Elections Website. Full text of the amendment can be found on the Florida Division of Election's Website.
(Paid ads - links are below.)
The amendment is actually a vote for 4 separate tax changes to the Florida Constitution.
(1) It doubles the existing homestead exemption amount from $25,000 to $50,000. The exemption covers the portion of the assessed value between $50,000 and $75,000. So in order to get the full exemption your property would need to be assessed for at least 75K. Properties with an assessed value between 50K and 75K would get a prorated exemption. However this additional exemption does not include the taxes paid to the school district. (Schools still get their cut.) The average additional exemption will be about $240.
- Pros: Additional tax savings for homestead properties.
- Cons: Loss of revenue to the government. This could be especially hard on governments in rural counties that derive most of their income from residential properties.
(2) Up to $500,000 of accumulated Save-Our-Homes Exemption can be transferred from an existing homestead property to a newly purchased one, so long as the sale of the old home was no more than 2 years prior to the purchase of the new one. The law will be retroactive to include sales from January 1, 2007 forward. If you are downsizing your home you will get a percentage of your accumulated exemption. Specific scenarios on how this works can be found at http://www.yeson1florida.com/scenarios.php . (Currently with it being non-transferable, when a house sells the seller loses the accumulated exemption and the new buyer does not get it either. The only winner is the tax collector.) Details on how the Save-Our-Homes Exemption currently works can be found on the Orange County Property Appraiser's site.
- Pros: Currently people are "trapped" in their home because when they sell they lose their exemption. Move-up and move-down buyers would be "freed" to buy and sell. This may stimulate the real estate market at least slightly.
- Cons: This perpetuates the inequities of the Save-Our-Homes Exemption. The big burden on the property taxes will still remain on shorter-term residents and non-homestead properties. Passing this portion of the amendment may prompt a federal lawsuit for violating the commerce clause of the United States Constitution.
(3) Creates a new exemption for the first $25,000 of assessed value for tangible personal property. If you are a landlord, commercial property owner, or business owner, you are required to fill out an appraisal form every January and list all of your personal property (i.e. appliances, furniture, computers, supplies, etc.). For smaller-time owners, the tax is typically $10-100 per year per property/business. This would basically eliminate this tax altogether except for large commercial properties and businesses - ones that own more than $25,000 worth of business related personal property. (This applies to all taxes including school districts.)
- Pros: It eliminates this tax and associated accounting work for most landlords and small businesses. It reduces the tax for large landlords and businesses.
- Cons: Loss of revenue to the government including school districts.
(4) Puts a cap of 10% per year on how much the assessed value of a non-homestead property can increase. The cap disappears if the property is sold. The cap expires completely on January 1, 2019. It does not apply to school district taxes. It is something like a Save-Our-Homes Exemption for non-homestead property. For instance if a property is assessed at $100,000, then the assessment in the next year will not increase to more than $110,000, then $121,000 in the following year. (Currently non-homestead properties can increase to 150K or 200K or more in one year).
- Pros: Puts a cap on surging increases in assessed value for non-homestead properties.
- Cons: Perpetuates the inequities and non-portability issues (similar to the existing Save-Our-Homes Exemption).
Now I am going to discuss the pros and cons to the amendment as a whole since we have to vote on the whole thing and cannot pick and choose which portions of the amendment we like or don't like.
Pros to the amendment as a whole:
- It does provide definite tax relief to homesteads, landlords, and businesses.
- Save-Our-Homes portability should "free" some homeowners that want to upsize or downsize and are currently "trapped" in their homes.
- It places limits on assessment increases for landlords and commercial property owners for the next 10 years.
Cons to the amendment as a whole:
- It cuts revenues to all levels of government except the school districts.
- It perpetuates the inequities of the tax system as a whole by rewarding long-time residents and long-term property investors with lower taxes while charging increased taxes to shorter-time residents and investors as well as new buyers for all property types.
- The political groups against this amendment claim it would cause apocalyptic type service cuts and layoffs in police, fire, rescue, parks, and similar services. (School districts are exempt from most of the tax cuts and caps.) I do not know the validity of this claim. Obviously taxes would be cut, but over the last 7 or so years tax revenues have dramatically increased (nearly doubling in many jurisdictions) and the cuts are relatively minor in comparison to the increases.
- It does not address some very basic issues. (1) It does not cut millage rates or assessed values except in a limited form geared toward homesteads and tangible personal property. (Many property's taxes are still high and will not get cut back at all.) (2) It does not give new buyers any sort of tax break. They will pay tax on the existing high assessment amount minus a 50K exemption for homesteads.
Now I am going to discuss what might happen if this amendment passes or fails (besides the obvious existing issues mentioned above). Please remember that this amendment needs at least 60% of the voters to approve it in order to pass.
What might happen if this amendment passes:
- The legislature and government may decide that the property tax issue has been solved and not try to make any further changes or fixes. However some members of the legislature along with the governor have stated that they will push for more tax reform in 2008.
- The amendment may get challenged via a federal lawsuit. This is especially true about the Save-Our-Homes portability portion of the amendment.
- Local governments may just find alternative means of raising their revenues like increasing impact fees, utility fees and rates, sewer and water hookup fees, permit fees, user fees, recreational fees, parking fees, etc., etc.
What might happen if the amendment does not pass:
- The legislature and definitely the local governments might state that "the people have voted and they do not want any more tax relief." Many local government officials and government labor unions are saying similar things right now. If it does not pass, further legislative attempts at tax relief may not happen.
- The next chance for the people to vote on a constitutional amendment will be in November 2008 which will affect tax bills that come out in November 2009.
Here are some 3rd party sites that provide additional information about the amendment. All these websites have their own agenda. http://www.votesmartflorida.org/ , http://www.yeson1florida.com/ , http://www.saveourservices.info/ , http://www.floridaisourhome.org/ .
Another site that has a unique idea to try and fix property taxes is: http://www.cutpropertytaxesnow.com/ .
I hope this detailed analysis helps in your decision making. Please do not ask me for a breakdown of the presidential candidates. You are on your own for that one. :-)
Added 1/28/08: Here is a link to a television interview I did on Fox News 35 regarding property taxes.
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(Copyright © 2008. Sand Dollar Realty Group, Inc. All rights reserved.)
Rob Arnold, ABR, CPL, CRB, GRI, Managing real estate broker, Licensed mortgage broker, Notary Public
407-389-7318 www.SDRhouses.com/
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Can you explain this part of the language in the ballot?:
b. Provides for homestead exemptions to be repealed if a future constitutional amendment provides for assessment of homesteads at less than just value rather than as currently provided at a specified percentage of just value.