ELIMINATION OF FLORIDA PROPERTY TAX
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I remember when I was a new mortgage originator, a single woman needed a co-signor to get a mortgage. I remember the 1992 Save Our Homes Amendment being added to our State Constitution, to limit the annual increase in the taxable value of homesteaded property. This legislation essentially limited the increase for homesteaders to 3% annually. Good idea, right? This legislation ended up causing a hug gap between market value and assessed value (value use to determine an owner’s annual real estate tax liability.) The unintended consequence was our real estate markets were suddenly very lopsided. People who wanted to downsize could not afford to, because they could not afford to lose their homestead deduction; or more precisely, they could not afford to essentially pay back everything they had had saved over the years in real estate taxes when they purchased another home, albeit that home was a “down-size”, a lesser or smaller home. As property values, increased would-be sellers who wanted to down-size often faced a much larger tax bill in their new home. So they didn’t move at all. In 2008 Florida citizens voted in Amendment 1 which provided the ability for homeowners to transfer, or “port”, their accrued tax benefit to another primary residence. This benefit was capped at $500000; a property owner had 2 years to take advantage of the portability benefit. The initial market impetus that resulted was somewhat dampened by the market crash around that same time. In 2020 however, the portability window was extended to 3 years. The unintended consequences, the imbalances, caused by earlier Florida Homestead legislation were more or less normalized. Now Florida’s Govenor wants to eliminate property taxes for all homestead property owners in our State. That would mean Florida could be the only state with no State Income Tax and No Real Estate Tax on primary residences. That sounds good to many of us who own homestead properties. Some proposals could be even more attractive for retirees. I understand the move would require a 60% super majority in both chambers to even go on the ballot, then a constitutional amendment must be approved by 60% of voters. On the surface it seems obvious, logical, there are a multitude of Florida homeowners who feel they would benefit. But just as we’ve seen how our post-covid market was perhaps superficially inflated, we may encounter huge potential for an awful lot of unintended consequences. Do we really need increased property values right now? as would seem an early result of getting rid of real estate taxes. Will it come at an overwhelming expense for first time buyers by disproportionately benefiting wealthy Floridians? When landlords get a higher tax bill, will their tenants be able to pay for it? What would happen to Florida markets in the event of a national housing crisis? Could we face widespread sales of second (vacation) homes in Florida, which could ultimately dismantle our tourist economy? Could we afford to lose the taxing dollars on these second homes, or afford to dry up our vacation home markets? What about it, could we get behind a higher sales tax? Could local governments become dysfunctional? In this politically charged climate, the question arises, what is the real and actual intent? These days I tend to say, Stop! What sounds like a windfall for current homeowners must come at the expense of something… roads, schools, infrastructure, emergency services… general quality of life ? Whatever scenarios we might predict or indeed encounter, long term or near term, some arguments are predictable, some scenarios, well, maybe not so much. Where is the balance? I totally agree, property tax can be a real sticker shock for buyers, especially in coastal areas where insurances add even more and very significant cost to home ownership. I have worked with international buyers who initially assume the real estate tax they are informed they must pay is a one time expense paid at closing… not every year. There is validity in many of the arguments, pro and con. No one wants to jeopardize school dollars. I am not a proponent of putting the bill on our tourists’ tab, or further penalizing owners of non homestead property. And personally, I have trouble getting past the cultural implications, the probability of unintended consequences. In any event, discussions are fascinating. I came across an organization that has especially impressed me as a resource, they offer detailed and educated explanations of where we are and what needs to happen to make it (tax elimination) a reality. Their clients are primarily seniors and veterans. I have been given permission to reprint their publication here. And they promise a forthcoming series of “in depth deep dive” analysis on each individual tax proposal, clarification they feel may be lacking from the State.
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