Added to Tuesday’s primary ballot is a proposed change to the way property taxes are assessed.
Currently, a rule of thumb is that taxes on real estate are nearly 2% of appraised value. Usually the appraised value is lower than market price and owners who live in their homes can claim a $25,000 deduction. The median price of Florida houses is about $300,000, so a home buyer could be paying $6,000 per year.
There is a cap on the increase in appraised value of no more than 3% as long as you stay in your home. That means many people are living in homes valued well below market. However, this cap is removed when you sell, rent it out, or move to another house; the buyer starts paying at the new stepped up appraised value.
Amendment 1 proposes an increase of the ‘homestead’ deduction to $50,000, and allow portability of the cap when moving to a new home.
Sound fair enough? Well, that’s not the whole story.
By state law real property taxes are assessed as a millage on appraised value, an ‘ad valorem’ tax. The revenue is split for county services, and about half goes to fund public schools.
Amendment 1 excludes reduction in the funding of schools, so any drop in tax revenue would fall on the county. Nowhere in the bill is there provision for more efficient governance, so the county is threatening to cut services, not expenses.
By excluding the school funding from reductions the homestead exemption effectively becomes more like $12,000, less than a $240 tax break per homeowner, irrespective of the value of their house.
Also not in the bill is any restriction for the county to increase its millage rate. It is free to raise it to make up lost revenue, even as property values decline. As real estate values sky-rocketed in the last few years, home owners and business owners pleaded for relief from the increasing burden of ad valorem property taxes but as values cooled or declined recently, county appraisals remained about the same.
Another glaring oversight is that the law appraises property as if it were ‘best use’. Some small motels in desirable locations are taxed as if they were occupied by higher valued hotels or condominiums. Many owners went out of business or sold to condo developers. Some of those projects are now languishing in the recent downturn.
An interesting aside to the proposed Amendment 1 is the frequent television advertisements by staunch supporter, State Governor Chuck Crist. One wonders why he needs to ‘sell’ the proposal.
It appears there are serious problems with the state’s property tax system that needs reform but is Amendment 1 going to help?
For polling times and locations please see Florida Primary Smackdown.