Florida Editoral Supports Property Tax Reform

While it seemed as though the Florida Legislature would pass property tax reform this spring, another session adjourned with no changes made. It’s now been 25 years since the homestead exemption was increase, while the taxable value of real estate has increased seven-fold during this same period.

A recent editorial in The Sun-Sentinel urges politicians to do something about this issue because the current situation negatively affects those looking into Florida home loans. To paraphrase from it …

The Legislature has asked the Department of Revenue to study tax reform and to report back in 18 months. If the test remains whether reform would have a “negative fiscal impact on local governments,” there will be no meaningful reform. This would be another major mistake.

Local governments have increased their size and scope of services fueled by windfall tax dollars resulting from our overheated Florida real estate market. The taxable value of real estate in Broward County was $76 billion in 2000 and $171 billion in 2005, an average annual increase of over 22 percent.

Increasing the homestead exemption to $50,000 in 2005 would have reduced the taxable value of Broward County real estate by $10.6 billion, limiting the increase in taxable value from 2004 to a mere $17 billion (12 percent increase). The problem is, without legislative restraint, most local governments could offset any revenue loss by slight increases in their millage rate.

Thoughtful tax reform should have been the top priority of the Legislature because of its importance to the economic development of our great state. By not taking action earlier, pressure will be on the next Legislature to pass patchwork legislation with possible unintended consequences. Worse yet, angry taxpayers could support a citizens initiative that could cripple local governments.

What can be predicted with certainty is two major setback:

1. Many people, particularly retirees, will opt not to move to the state and/or consider a Florida home loan because of high property taxes.
2. High property taxes, high insurance premiums and high interest rates will result in record foreclosures in the years ahead.