The Senate Plan on Property Tax Reform (Updated)

SenateFlorida Senate

As reported in a few places, the Florida Senate has announced it’s six-part property tax reform package. The House package is contained in HJR 7089 by the Policy & Budget Council.

Here are the points from Naked Politics, with some analysis included:

Rolled Back Rate

* Roll back local-government property taxes to the 2005-2006 tax year and then allow governments to increase adjust the rates based on population and inflation. The rate would freeze for a year, meaning taxpayers would pay less next year than this year.

The House rolls back to 2003-2004 and does not include the one year freeze.

This is a change the the definition of what is called the “rolled-back rate.” The rolled-back rate means, “this is how much the millage would be this year to give the government the same amount of money it collected last year.” In theory, if the government never needed more or less total money, the rolled-back rate would decrease every year because total value of all properties increases.

Many local governments work in the reverse, if we kept the same rate, how much money would we collect? A lot of them cut the rate – which means they technically “cut” your taxes, even though you pay more because your property value went up. (This is a government “cut” which means less than you would have otherwise… not a real “cut” which means less than last year.)

Revenue Cap

*Cap property-tax revenues for cities and counties going forward, and preventing tax collections from increasing by more than the population and inflation rate for any particular year starting in 2009.

The House cap is on the millage rate, which means the total collections could be above the inflation-plus-growth limit. The Senate limits total collections, which could have a dramatic impact on the millage rate.

If inflation is 3%, growth is 5%, and the property values increase by 10% – its possible to see the millage rate decrease by 2% under the Senate Bill, keeping total revenue to an 8% increase; while the House Bill would allow the local governments in increase their total revenue by 18%, by capping their millage rate at 8%. (This is a DRAMATIC over-simplification, but the effects are fairly accurate)

Bill of Rights

*Give taxpayers as “Bill of Rights” that allows them to more easily see how government money is raised and spent.

There has been some attempts in recent years to make TRIM notices easier to read. If this measure is implemented correctly, it could be a big help to taxpayers – and could make local government officials squirm some more.

The Buzz notes this about the Bill of Rights:

Property would have to be assessed for what it’s currently permitted for, not what it could be. Fair compensation to homes subject to eminent domain, with SOH going to new property; local governments would have to post revenue and expenditures online, a nod toward “transparency.”

The House bill does not include this provision. However, using the current use rather than highest and best use would be a major help. It would also reduce costs for government projects through the eminent domain process; especially if the cap is maintained at the new property.

Helping Businesses

*Exempt $25,000 of businesses tangible personal property taxes —- paid on items such as computers and shelves. That would up to 1 million businesses from paying the taxes, and allow 300,000 future businesses to have a partial cut, according to the Senate plan.

This is the same provision as in the House bill.

Double the homestead exemption

*Double the homestead exemption to $50,000 for first-time homebuyers. The exemption would return to $25,000 over the years as the value of a home grew.

The House bill does not include this provision, because it allows for counties to totally exempt homestead properties from property taxes.

A higher exemption for first-time homebuyers is one way to help ensure that growth pays for itself. That combined with the portability provision below should provide local governments with enough growth-related revenue to meet growth-related expenditures

Income producing properties

*Tax affordable housing owners based on the rent they collect rather than the market value of the property.

The House plan includes a provision that renters can receive benefits given to their landlords. However, the Senate provision has the virtue of promoting affordable housing by lowering their property taxes if they lower rent.

Portability

*Allow homeowners to keep their savings between their assessed value and taxable value if they move to a new home. However, the taxable value of the home will grow by 10 percent —- as opposed to the current 3 percent increase currently allowed under the Save Our Homes cap. Over time, the home’s taxable value would return to 3 percent.

Again, because homestead properties would be totally or partially exempt in the House bill, there is no provision for portability.

I need to review the details of this provision to determine how this works. This summary says that if I move from a $200,000 home to a $500,000 home, I am taxed on the $200,000 home and the value increases by 10% per year… it could take a while to get to the $500,000 home’s appropriate value. Or, it says that when I move, I am taxed on the $500,000 home and its value increases by up to 10% per year, sliding down to 3%.

Now, if the provision is supposed to remove the “trapped in their homes” issue, I have to believe it’s closer to the former than the latter example.

It will be interesting to see which plan passes… since there is a wide gulf between no property taxes (House) and reformed property taxes (Senate). On other areas, the Legislature is in closer agreement.

UPDATE: The Senate Bill has been filed as SJR 3034.

About Jim Johnson

Editor and publisher of The State of Sunshine.
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