The news yesterday and today shows the heat is rising in the debate over how to "fix" Florida's property tax problems.

In short, the middle class is being choked out of Florida property.  The reason is because there is no state income tax so there is a higher property tax.  The Middle class is the upwardly mobile group that is upgrading from starter homes at 3bedrooms 2bathrooms to the family home at 5bedrooms 3 bathrooms...  That jump in property NEEDS creates a new price point at which they can be taxed.

The method I've become comfortable with using to calculate property tax on a single family home is:

• Purchase Price - 20% for land = Improvement Taxable Base - Homestead $25,000 = Taxable Base x 1.75% (millage) = Annual Taxes
• For a condo, subtract only 15% for common area...

This debate is coming at a pivotal time for Florida and could cost the state hundreds of millions of tax dollars if instituted improperly.

What's on the Table:

• Republicans in the State Senate have proposed to roll back taxes to the 2001 levels.  This would bring the taxable bases down significantly AND take off the 3% max annual increase for the past 6 years for another 18% potentially.  This bill is seen to be controversial because some areas would see bigger drops than others due to appreciation, local millages, and local improvement.  This is an interesting compromise to what I will detail below in the unrealistic area.
• Democrats are saying that the Republicans have a stupid idea and they need to have more time to review all options... Republicans are saying that further review increases suffering and stalling is actually hurting everyone.  Democrats' assertions are that sweeping tax cuts will just hurt local services like libraries, police and an already hurting school system.
• Democrats announced yesterday that their solution is to reduce property taxes 30% across the board and raise sales tax 2%.  That would put sales tax as high as 8.5%... which while reducing PROPERTY taxes, Renters will suffer as will small businesses renting office, retail and warehouse spaces.  Services across the board could remain unhurt but big ticket product vendors might get squeezed.
• Republican Governor Charlie Crist wants to be very careful and look at other forms of income for the state so there is no huge drop in budget dollars.  One thing that is in the works is a lawsuit against the US Government by the Seminole Indian Tribe.  Currently gaming regulations have not allowed them the same gaming rights as their local competitors.  In Florida, the Seminole Tribe owns 8 casinos - 4 in South Florida.  Their most recent acquisition has been the entire chain of the Hard Rock Cafe, Hotels and Casinos brand.  They have two such resorts in Florida - Tampa and Hollywood/Ft Lauderdale.  In their casinos they are only allowed poker, video poker and bingo style slots - they are suing for equal rights to Las Vegas-style slots which will allow them to gain some of the casino-dollars lost to the local off and onshore slot machine venues like Gulfstream and Calder Racetracks.  Gov. Crist is backing their claims of unfair competition and in return he hopes to work a deal to acquire tax rights to the new Vegas-style slot machines that they install.  Currently the state has a 50% tax on Slot machine profits statewide ... except at Seminole Nation Casinos.  This would be a first level of gaming taxation the Seminoles would accept but would ultimately profit their enterprises and the State of Florida.

What's Unrealistic:

• Leaving taxes where they are is creating a brain drain in several ways.  First, the middle class is creating a virtual exodus to surrounding states where they can be transferred and have more space and not be burdened by such high cost of living due to property taxes.  It is also creating a drop in enrollment in colleges statewide due to high housing costs around college towns.
• The first bill which saw praise but was incredibly unrealistic was to do away with property taxes altogether and just raise sales tax 2%.  The estimated loss in revenue would be $800,000,000 to the state budget!!  How much could 2% make up for that enormous a loss! That would require $40,000,000,000 in taxable goods and services sold just to come up with that many tax dollars....

What's an outside hope:

• President Bush arrived in Sao Paulo, Brazil yesterday to widespread protest.  One of the best bits of news for Florida in this trip is his negotiations to create a Bio-Fuel Alliance with Brazil - the world's largest producer of Sugar, a by product of production is Ethanol from the leftover Cane.  In Brazil, I saw Ethanol sold at all the same stations that sold gas ... and for 1/2 the price.  As Florida is also a huge Sugar cane producer, the alliance would provide the Ports of Miami and Port Everglades the opportunities to receive the importation of Ethanol fuels from Brazil to sell in the US.  This will create a new Biofuel Trade Zone and Mini-Economy based in South Florida!  Taxes could be levied to benefit the State and as the FlexFuel industry grows - so shall the tax dollars for Florida.

There is a lot at stake in these debates.  The issues are stifling but the Republicans are seeing this as an opportunity to make sweeping changes prior to the 2008 elections which would not take effect until Jan 1, 2009.  In the 1.75 years until then, the whole state will feel the pressure - and this is what lawmakers are trying to relieve.