Real Estate: A Property Tax Renaissance

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I know this is an odd title for this week’s episode. It came to me as I was walking my greyhound, Koffee, this morning at 4 a.m., with the moon and stars still visible.

I have received questions from friends and readers on ballot Amendments 1 and 2. As in any campaign, there are arguments on both sides. Soon enough we will know the winners.

Because we have no state personal income tax in Florida, a substantial portion of government funding comes from taxation of property. As a result, instead of the lobbyists being in the halls of Congress hearing Russell Long’s rhyme (from our last column), their Florida “technical adjustments” go into our property taxes.

For centuries, astronomers plotted the movements of the Sun, moon and planets according to the system initially developed by the Roman astronomer Ptolemy in the 2nd Century. As time passed, however, people observed movements in the skies that didn’t conform to the original Ptolemaic system. So they made adjustments. Then more adjustments... and more and more. By the end, the predictive system looked like an octopus and no one could understand it. And it still didn’t work very well.

Eventually, working independently, Renaissance scientists such as Copernicus and Galileo asked a simple question: What would happen if the core assumption was not that everything revolved around the Earth, but that everything revolved around the Sun? And Voila! (or maybe Copernicus said Tutaj jest; he was Polish). It worked almost perfectly, without adjustment.

Which brings us to Amendments 1 and 2. Much like the Ptolemaic model, over the years politicians and the public made adjustment after adjustment to the system for taxing “homestead” (owner occupied) and “non-homestead” (everything else) property. Undoubtedly this was done with the best of intentions. Yet now we have reached a place where, according to the Florida Times-Union, homestead property in Florida is taxed in the aggregate at 53 percent of assessed value, and non-homestead at 91 percent! (Of course there are variations from the aggregate depending on county.)

Consider what Amendment 1 would do. (I will discuss Amendment 2 on my blog and on Facebook as the election nears.) In simplified form, people with homesteaded properties valued at more than $125,000 will receive, all other things being equal, a property tax cut of about $300. But all other things won’t be equal. Government revenues statewide will be reduced by nearly $1 billion as a result. So services will have to be cut, and/or the underlying tax rate will be increased. The net effect will probably be about a wash. 

However, this will add another layer of complexity to the system. Perhaps what we should do, instead, is tell the politicians to take a step back, remove all the preferences and exceptions, take a clean sheet of paper, and construct a simple system of sensibility and equity for all property owners in Florida – regardless of homestead status.

In doing so, we can begin a property tax Renaissance.

James Oaksun, Florida's Real Estate Geek(SM), is Broker-Owner of New Realty Concepts in Oakland Park. In addition to having degrees from Dartmouth and Cornell, he is a Graduate of the Realtor Institute (GRI).


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