There will be another Amendment dealing with Property Taxes on the Florida Ballot in November - Amendment 5 seeks to remove school funding from property tax and have it replaced with an increase in State Sales Tax. 60% approval is required if the Amendment is to become law in Florida.

So what does this mean for you?

Well accoriding to the Florida Association of Realtors, quite a lot!

1. Amendment 5 is a property tax cut for everyone. This Amendment will abolish the state's Required Local Effort (RLE) property tax levy for school boards in 2010. Depending on where the property is located, that cut equals 25‐40 percent of the total property tax bill.  The RLE, also called the amount required by state law, located under the school board portion would be done away with. Those are legitimate property tax savings.

2. Schools will still be funded in Florida - and held harmless - under Amendment 5. This is simply a different and fairer way of funding our school system. Due to language in the Amendment, the Florida Legislature will be required to fund schools to the same number as next year, adjusted forward. That means schools will still receive between $10‐11 billion in funding in 2010, while property owners get a $10‐11 billion property tax cut.

3. Amendment 5 is a fairer way to fund our public school system. Compared to renters, property owners pay a disproportionate share for our schools. Also, property owners that pay for private school must also pay this tax for public schools. In addition, Amendment 5 continues to allow local school boards to levy discretionary millage.

4. The Legislature will have a number of options for funding schools in the future. Amendment 5 allows for budget cuts in other areas of the state budget; the repeal of sales tax exemptions (except for basic exemptions such as food, rent, heating fuel, medicine and health care); an increase of up to 1 cent of the statewide sales tax rate (currently 6%); or other taxes and revenues (such as the cigarette tax) at the discretion of the Legislature.

5. Raising the sales tax in Florida does not necessarily disproportionally affect the poor and needy. First, many of the items that lower‐income people buy are exempt from the sales tax, and are not eligible for repeal by the Legislature. These include unprepared food, rent, heating fuel, medicine, electricity and health care services.

6. Florida's property tax is a wealth tax. When a Floridian owns a piece of property, even when the mortgage is paid off, the government can come and seize it, or force a tax lien, on the property if taxes owed are not paid at any time. In difficult economic times, many people are cutting back on purchases, resulting in decreased sales tax revenues for the state. Switching from a wealth tax to a consumption tax (sales tax) will put many Floridians ahead by making their property more valuable (because of less taxation) and allow property owners to control more of the tax money they pay (through a sales tax).

7. In January 2008, Florida voters approved an amendment the capped assessments on nonhomestead property - commercial, vacation and second homes and agricultural land - at 10 percent. Amendment 5 would lower the cap to 5 percent. The effect of a 5 percent cap is more likely to be seen in the near future, whereas the 10 percent cap would only offer relief to people in a hyper‐real estate market. Also, the 5 percent cap is permanent - while the 10 percent cap was only for 10 years and would need to be renewed by the voters.

8. While it may seem that renters will pay more in taxes in the long run, it's possible that even they will save under Amendment 5. First, it will lower the cost of property and make them more likely to be able to afford a home of their own. But even for long‐term renters, it's likely that because of the 5 percent assessment cap offered in the Amendment, they'll see fewer rent increases due to more steady property taxes for their landlords.

9. Florida's sales tax system is compromised with over $23 billion in loopholes, and the legitimacy of these exemptions should be reviewed. Amendment 5 will require the Legislature to determine if exemptions for ostrich feed, luxury skyboxes and others are appropriate.

10. Other revenue options could include raising the tax on cigarettes (which cause a disproportionate share of Medicare and Medicaid costs to Florida) and a tax on Internet purchases (which could generate $3 billion in revenue to the state

So there you have it - we are gearing up for another property tax fight here in Florida and I have a feeling it is not going to be pretty. The Florida Association is preparing to spend another $1m in support of this amendment so plenty of advertising is to come!

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(Copyright © 2008 By Simon L Conway All Rights Reserved.)

Please give me a call if you have questions about the Central Florida real estate market.  You can reach me on 407 876 8200.  Also visit my web site at www.simonconway.net or www.move2orlando.net