I TIVOed the local news the last night because they were reporting on a new bit of legislation to combat high property taxes....

http://www.wpbf.com/news/11071939/detail.html is the link to the story.

The bill is a trade-off.  They want to try to eliminate property taxes in favor of a higher state sales tax.  So the goal is to potentially move from 6.5% to 8.5% sales tax.  That is a 30.7% jump!

State law makers are worried that they would not be able to make up the difference in taxes if they did this.  I agree.  Think about it.  8.5%... the dollar menu at McDonalds would now cost 1.09... the dollar store would now be the 1.09 store...

Wait...that's not going to hurt us!! People still have to eat and buy their day to day items.  Where is will hurt us is in major ticket items - like Cars.  $15,000 VW Rabbit + $300.  Wait.... that's not that much either... oh yeah... we're talking major electronics purchases... we're talking luxury items... we're talking furniture... and we're also talking TOURISM.  Yes... Florida's number one industry will take a hit.  It is already expensive to go to Disney at $63/day per the last report I heard.  Add 2 more percent and that adds another $1.30 per head gathered at Disney alone... 

The gentleman that was interviewed said that he supported the bill because even though a renter (subject to 6.5% rental tax) will have to pay more at the store for his/her daily needs, it will eventually encourage more buyers to step up and buy since the PITI payment on their mortgage will now just be PII... whoops... sounds like a Nintendo device. 

The renter on the other hand said that she would suffer for all the homeowners that don't want to pay taxes.  I agree with this as well.  Her rent will go up - $20 per $1000 in rent immediately.  It will also effect small businesses leasing space since the state collects rental taxes on that as well!  That's just going to drive up the cost of their products and services.

So basically what we're hearing is that a bunch of people - mainly retirees and middle class - don't want to pay property tax, even though it is a trade off since there is no state income tax.  Because there is no state income tax, SALES Tax is also tax deductible... and they'd rather roll the dice that 2% of their total taxable purchases in a year is LESS than they're paying in property taxes.  Plus... they're saying that now everyone is chipping in, not just property owners.  hmmm... this bill seems to be timed badly considering there is already a bill on the table for portability of homestead... a bill just took effect Jan 1 that doubled homestead for seniors anyway!  We're also battling insurance costs... 

It just seems that this is adding fuel to the fire.  WPBF polled people - and aired the results last night.  Today there are only 279 respondents with 74% saying raise sales tax.  In Market Research and Scientific research a valid sample set is 400... I think that most people haven't thought this through very well.

Toss this out there... given we get the tax deduction on Sales Tax, the 8.5% tax would net out to 6.375% after a 25% tax bracket deduction.  If the resident of a home, let's pick on the retirees since the gentleman interviewed specifically pointed to them as more likely to leave, has a $150K assessed value since they bought say 8 years ago.  The $150K - new $50K homestead for seniors would have them at a tax base of $100K... or $1750/yr.  At that 2% increase in taxes, they would have to spend $87,500 per year on taxable items and services to put the same amount back into the state.  So yes, it would benefit them substantially!  If they spend $30K a year on taxable items, they would only contribute $600 to the tax income of the state.  hmmm... how does that sound like a good idea? 

Top that off with all the snowbirds who do not live here year round but claim this as a homestead anyway and you are dropping a LOT of wealth from the state.  Now looking at it closely, it could benefit the middle class... but at what other costs?  Education? Infrastructure? Police? Public Transit? Pro Sports - yes I said it - we want to keep the Marlins even if the snowbirds still cheer for the Brooklyn Dodgers...?  What is the trade off? Where does the money come from? Bonds?? HA!

As far as affordable housing... yes... it will help get some people into properties and control the monthly payment.  $100/month can definitely help get someone stepped up a notch in property value.  But what if they're spending $10-20 more per week in sales tax?? That could negate that $100/month in a hurry... that gets tacked onto a credit card bill and the debt ratios get adjusted too. 

8.5% is extravagant.  Perhaps there is a BETTER way... Heaven's forbid a Real Estate Professional Lobby for compromise in this state!!  Here's a thought.... 7-7.5%... not much of a change... but don't let that property tax fall off altogether.  We need it.  It keeps people from cheating the system totally.  It also helps counties and cities identify what tax monies belong to them.  Sales Tax goes to the state to be redistributed.  The poorer counties usually benefit from this and more populated counties get stiffed on major projects like stadiums, roads and schools. 

The other idea I have is just to give up on this off shore gambling stuff and allow table games in casinos - including the Seminole Nation - and tax gambling profits across the board higher.  We could also tax other things higher rather than just a broad spectrum raise.   Perhaps lower the taxes on building materials which could carry over to hurricane repairs and preparations out of season... but raise the luxury tax on cars.  Tax Fast Food higher ... much higher.  Tax benefits for Gym Memberships... and tax medium and large businesses (leave the small ones alone!) more for not providing adequate health coverage! 

We just can't do a sweeping bill like this because:

1. It means that big ticket items will be bought out of state or online with retailers that do not charge tax
2. It means that the overall income to the state will drop significantly and it will be up to the small ticket buyers to make up for it
3. It really doesn't make a hill of beans of difference to affordable housing or first time homebuyers!! It is just a trade off!

Compromise if you HAVE to do something... just remember that this could get in the way of portability of homestead which is more valuable in my mind because it helps free up affordable HOMES for lower income while getting upwardly mobile middle incomes into bigger homes they need without a huge tax hit!