Would You Trade SALES TAX for PROPERTY TAX?

By
Mortgage and Lending with On the Outside Lookin' In

12 April 2007

With the April 17th Federal Income Tax deadline looming as a reminder, "taxes" in all forms moves to the forefront of our minds.  Property tax in particular is becoming a major issue in Florida (although I think insurance should).  No one is certain as how to get rising taxes under control - the massive real estate appreciation of the first five years of this century didn't help a bit - Ma and Pa Homeowner in the 21st Century

I received this email today from a "Doris Jones".  I do not know who Doris is (I did not find her on AR either) and my Google search  under "Doris Jones - Florida Realtor" revealed nothing. 

However, I DID find the web address "Doris" provided went to a website entitled No More Property Tax, which states it is sponsored by the Republican Party of Florida.  I Googled "nomorepropertytax" and many news articles and blogs showed up - 133 in 0.26 seconds.  It appears this movement - which is essentially will raise sales tax to 8.5% while essentially eliminating property taxes for full-time residents and reducing it for 2nd homes. 

There are skeptics on both sides of the equation.  While in Florida in February, I read a newspaper article that said Florida would have to raise sales taxes to 13.8% to eliminate property taxes.  I suppose the elimination for residents coupled with the reduction for non-residents resulted in the 8.5% number.

There is more to this than just swapping numbers.  A few questions are posted at the end of this blog entry for consideration.

 

Here's is Doris's email and the link to No More Property Tax dot-com:

If you haven't already heard, the Florida State government is looking to make dramatic reforms in how Florida property taxes are paid (if at all), and this could go into effect by next year. I don't have to tell you the incredible impact that this would have on Florida's real estate market.

Here is a summary of what is being proposed (and we are expecting it to pass:)

- If you own a residence in Florida and are homesteaded (as your primary residence) you would no longer pay property tax.  Zero.

- If you have a Florida residence as a second home, or if you have a commercial property, property taxes would be rolled back to 2000-2001
levels.

- Future property tax increases would be limited.

To accomplish this aggressive measure, the State of Florida would increase general sales tax by 2-2.5%.

Those of us who live in Florida are extremely excited about this initiative.

We would like to ask you to add your name to the petition in support of this initiative.  Click on link below and register your support.

We are expecting it to pass, however, your voice would be welcomed.

Please forward this email to other property owners you know in Florida.

(Fields marked with * are required)

http://www.nomorepropertytax.com/endorse.php

(end of email)

 

So, the taxation question exists for YOUR state as well as Florida: 

  • Would you favor an elimination of property taxes by raising sales taxes? 
  • What would the consequences be?

Imagine qualifying borrowers and home buyers without property taxes: 

  • Would the result drive up sales prices again?  Would this jeopardize borrowers ?
  • How do you think this would affect your state's economy?

Other insights or ideas?

 

Art Blanchet

Bill Quigley

 

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Rainer
13,197
Greg Myers
G L Myers Real Estate Services - Chapel Hill, NC

On a fundamental level I prefer taxing consumption over taxing ownership.

The most fearful part is the unintended consequences of such a major change to taxation could be severe. The unpredictability of revenue is a major problem for local governments. Several major projects will likely be put on hold in the Orlando area, and the time delay alone may be enough to kill a project. 

Apr 18, 2007 11:40 PM #33
Rainer
1,936
Michael Fooladi
Build Knowledge Services - Navarre, FL
Absolutely.  Raise the sales tax and do away with property tax. 
Apr 19, 2007 04:41 AM #34
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

Hmmm Jason, you seem to promote a lassaiz-faire type of economic situation.  I do have a problem with your tenets of the "perfect world" and they are thus:

1.  Point #2 will never happen, not because of greed but because many investors are upside down in rents.  Maintaining rents will help cover that gap.

2.  While you are correct with point #4 about increased spending, a decent portion of this will likely go towards moving up in the housing world, not in goods.   

My personal opinion is that the elimination of property taxes is a pipe dream that should be permanently shelved.  Taxes are not a bad thing, excessive taxes are.  I also feel that sales taxes are regressive in nature.  Florida sales tax at 6% is plenty, no need to raise it.

What is needed is a rollback or modification of property taxes such that we all pay less, but not eliminate them.  The state needs money and those thinking you can make do without income or property taxes aren't clued in.  Florida has a terrible educational system from elementary school on up and cutting funding is not the way to go.  At the same time I know that these local governments screaming for funding are the same ones that made do several years ago when they received less money.  Now that prices have gone up and taxes have adjusted, they're pulling in a lot more.  I need to see that translated to better schools.

For those wondering, my focus is on education because, 1) it's one of the most important issues, and 2) I'm from an area where public schools might be better than private schools in S.Florida.  That's an indicator of how far behind the educational system is here.

Everyone has to bite a part of the bullet and a happy medium can be achieved.  But to think that an elimination of property taxes is the answer, perhaps a S.Florida education is behind that mindset....

- Tchaka 

 


Apr 22, 2007 04:37 PM #35
Rainer
13,197
Greg Myers
G L Myers Real Estate Services - Chapel Hill, NC
A sales tax increase replaced the property taxes my parents paid in Dekalb county Georgia several years ago. After a few years they now have the higher sales tax and a "new" property tax to pay. Someone has to pay for the services. $35,000,000,000 cannot be cut from revenue without a reduction in services. I don't hear much talk about what spending is going to be cut due to the loss in revenue.
Apr 23, 2007 12:47 AM #36
Rainer
95,969
Jason Price
Mortgage Financial Group, Inc - Eustis, FL

Tchaka,

I am not trying to promote a "hands off" econonic situation.  I am one for consider all the options and don't just take the option that elimiates a tax (it just means the tax is gone to get a new name and a new way of being collected... whether it be an imidiate change or something in the near future.)

Also, I did point out just as you did that situation # 2 will most likely never happen.  And I am not sure that I agree with your reasons for #4.  Right now with the houseing price adjustments, most consumers will more likely buy "toys" over upgrading to a new home.  The reason I believe this is because most people right now may already be upside down in their homes.  The removal of the sales tax will allow them to at least stay in their homes without fear of foreclosure.  Because they can now enjoy their homes, they will spend money on that home by buying the home theaters, nice furniture, and other "toys" to make the home "nicer."

Is rolling back taxes to the 2005 level or even the 2001 level the best proposal?  Who knows... at least it is not elimiating a tax.

In referrence to your comments about the school situation in S. Florida, I am from S Florida and attended a private school.  I am not sure what area of S Florida you are referrencing, but where I grew up, the private schools greatly exceeded that of the public school system.  And don't get me started on the schools needing money... that is a whole other issue (the Florida lottery).

 

Apr 23, 2007 01:20 AM #37
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

Jason -I see the confusion in my sentence about schools so allow me to clarify:  I am from an area outside of FL (ie, Northern Virginia) where public schools might be better than private schools in S.Florida.  Hopefully that clears it up.  

Point #4 is up for debate and while the natural tendency is to spend disposable income on goods and services and I'm sure you're right that many will choose that route.  I do know (due to my mortgage and realtor background) that one major reason for the stagnant real estate market is S.Florida is due to affordabilty particularly in terms of the tremendous bump in taxes.  If this were lessened, I see more movement.  Perhaps the true route is a combination of both.

 

Greg - Your comment is right on the money (pun intended).  Funding is needed and has to come from somewhere.  I do agree that property taxes in FL are out of control and need to be reined(sp) in somewhat.  But eliminating property taxes altogether in a state that doesn't have income tax either is irrational. 

- Tchaka

 

Apr 23, 2007 04:25 AM #38
Rainer
95,969
Jason Price
Mortgage Financial Group, Inc - Eustis, FL

Tchaka,

I appreciate your clarification; however, I am not sure why you are referencing private schools to make your point about the public schools and the funding of the school system in Florida.  Assuming you are correct that S. Florida private schools are below par to the VA public schools, you are comparing apples and oranges.  Private schools have their own curriculum that is not governed by the state and receive funding from sources that are not of the state (That is why they are called private schools).

Now, I will not argue that there is a problem with the public school system and its funding, but your reasoning is flawed: using a one state's governed program and comparing it to another state's non-state governed program.  Plus, you do not even know for sure if your statement is valid because you are using the term "might."  Perhaps, you would be better to say: "Compared to the public school systems of the NE, especially where I come from in the northern parts of VA, there is a big problem with the Florida public school system and the funding of it.  By eliminating a tax that is supposed to be going to the improvement of the public school education, we would only be making the situation worse."  With a comment like this, you are not coming across as offensive and you are using information that is generally accepted as fact.

Apr 23, 2007 06:03 AM #39
Rainer
34,521
Liz Landry
The Landry Team-Keller Williams Realty - Jacksonville, FL

Let me say. I live in Florida. Born an Raised.  Been here all my life and I will probably die here.  The thing is, that inusurance and property taxes go hand in hand being a problem here.  Now, the reason that it has become so threatening to our economy is that Florida is growing, and growing fast.  But not just from your every day person.  The rate of illegal immigrants in Florida is STAGGERING. Now, Im not here to debate Legal vs. Illegal.  But the fact of the matter is, Illegal is outweighing the legals in the bottom half of the state.

 That means that in order for the state govn't to have schools, and social programs to handle these large amounts of people, not only are taxes going up because of home prices, the millage rate is going up to. Afterall, that money has to come from somewhere! 

I think that it is more than fair to get rid of tax on a homesteaded property, and raise a general tax to 8.5%. All is fair, everyone is paying taxes that way.  Florida is a whole different bag of apples when it comes to things like this. You really have to be here to understand the full degree of the situation.

Apr 23, 2007 09:40 AM #40
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

I see your point and might have gone that route is sparring feelings was my concern.  It's not.  

My point is to show how horrible the school system is in Florida (I'm actually referencing S.FL) and if you are not able connect that my comparison is purposely written that way to depict how low education appears to be in many areas, well so be it.  Your dissection of my post may serve to make you feel better but it doesn't change my stance.

- Tchaka 

Apr 23, 2007 09:43 AM #41
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

Liz, I have no idea if illegals outweigh legals in Florida (or if just in the South).  I do believe that's an issue that needs to be taken up with the state and/or federal governments.  Leaving aside the regressive nature of a sales tax, do you believe that raising sales taxes to 8.5% will provide sufficient funding for the state?

Another item to toss into the ring based on your post is that while I will enjoy no taxes on my home, I will continue to get beaten down by high taxes on any investment property I own.  I feel I will benefit more by finding a compromise through lower taxes.  What's your take?

- Tchaka 

 

Apr 23, 2007 10:04 AM #42
Rainer
95,969
Jason Price
Mortgage Financial Group, Inc - Eustis, FL

Tchaka,

That is fine to say that the school system in S. Florida is horrible (it is your opinion), but the private schools do not fall in that category. In fact, S Florida has some of the top private K-12 schools in the nation.  If you are going to state something, please make sure that your facts are correct.

I can see your strong feeling towards your local public school system, but do not state that private schools are lacking too.  Perhaps, you should takes this energy and vocalize it to your local government so that they can do something about it, as this is a local matter for you.

Apr 23, 2007 11:00 AM #43
Rainmaker
594,817
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

1. I was speaking with an out-of-state client today who was telling me that they have no property taxes, but they killed on every other tax. Anything the government does, is going to backfire. Their only concern is putting money into their own pockets. I have no respect for any party anymore.

2. I'm pleased with the schools in Port Orange, FL. My daughter is in the Dual Enrollment program. As a junior in high school, she's has already taken 4 classes at Daytona Beach College and will do so again next year. In this program, ALL expenses are covered. We don't even have to pay for her books. She is also a straight A student and will have a full scholarship for the only 3 years she'll have to attend the college of her choice, once she graduates from high school. As a matter of fact, she could graduate high school right now, but I'm keeping her from rushing into life. 

Apr 26, 2007 04:46 PM #44
Ambassador
2,066,449
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Palm Harbor, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor
Florida does not have a personal income tax, which is wonderful. Our increasingly higher property taxes are starting to make people consider moving to other states. Those who can afford to have a summer home here can also afford to pay property taxes. Giving full time residents a tax break would be beneficial. Right now people who have lived their whole life here and are on a fixed income have to worry about being able to keep their home in the future. This would eliminate that problem. Our sales tax is extremely low. Offsetting the elimination of property taxes for full time residents with higher sales taxes seems reasonable.
Apr 27, 2007 03:47 PM #45
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

Barbara, I agree with you that giving full time residents a break would be beneficial.  But that's pretty much the end of our seeing eye to eye.

I'm not sure where you get the idea that those who have a summer (or more appropriately, winter) home in FL can also afford to pay these higher property taxes.  Sure some of them are wealthy but there are many who love FL but aren't made of money.  Having your property tax double or triple will hit most people in the pocket.  And I'm willing to bet there are as many or even more people who have investment (instead of 2nd) homes in FL and when you do your models and suddenly you're responsible for an extra $5k of taxes, that changes things for most.  You're looking at investment money leaving the state. 

And why should property taxes be eliminated altogether?  Quite frankly, I have not heard anyone upset because we have property taxes, people are upset because property taxes are TOO HIGH.  So we need to solve the problem by getting them low again.  Elimination is an altogether different issue from lowering.

- Tchaka

Apr 27, 2007 04:55 PM #46
Rainer
34,694
Jackie Colson
Homeward Real Estate - Tampa, FL
Miller,Tampa Real Estate - www.RealEstateSizzle.com
In Tampa we pay 2.7% and it is KILLING resales...I am totally in favor of a higher sales tax and eliminating the property tax.
May 01, 2007 11:28 AM #47
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

Jackie, I'll pose the same question I've posed to others:  why do you feel property taxes need to be eliminated?  If they're too high, why not just lower them?

- Tchaka 

May 01, 2007 11:31 AM #48
Anonymous
RZ
I think that property taxes have to be eliminated in Florida State. There is no comparison between owning and renting. Especially, in South Florida. In South Florida a person can rent a condo for 1/3 what it would cost to buy it. This is not going to work for too long. Mainly because renters are not paying anything to the State. This is why they want to stop property tax and raise sales tax. I really do not know what took so long. Nobody is going to buy property unless they stop property taxes, and gradually, homeowners will sell at a lose or foreclose.
May 02, 2007 11:04 AM #49
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

If we eliminate property taxes, then let's bring back income taxes.

- Tchaka 

May 02, 2007 11:13 AM #50
Anonymous
RZ

Just lowering property taxes will not help. Like I said above, the State has to generate more revenue from people that rent. Whether it be people that rent for a week, a month or forever. Because Sales Tax Revenue was down last year as well. This is probably because the State is killing homeowners with property taxes and they have no money to spend. Sooner or later, the well will run drive. They have to kick up the revenue from the non-homeowners or it will just get worse.

May 02, 2007 11:19 AM #51
Rainmaker
127,037
Tchaka Owen
Galleria International Realty - Hollywood, FL

Like I said, let's bring back income taxes.

And don't be afraid to log in before posting.

- Tchaka 

May 02, 2007 11:37 AM #52
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