One Question on the Tax Reform Proposal

The joint letter from House Speaker Marco Rubio and Senate President Ken Pruitt included the following description of one component of tax reform proposal:

Providing immediate tax relief on this November’s tax bill was the first agreement reached. Cities and Counties will be required to cut their property taxes. The level of cuts will be based on a formula tied to the amount of tax increases in each jurisdiction over the last five years.

Those jurisdictions whose taxes have grown the most on a per capita basis will be required to reduce them the most. Similarly, cities and counties whose taxes have grown the least on a per capita basis will be required to reduce taxes less. We believe it is important to take into account local governments’ past behavior regarding tax increases, and also to grant the greatest amount of relief to taxpayers who have experienced the greatest increases in their taxes.

Many – if not most – local governments have cut their taxes over the past decade as property values skyrocketed. I recall reading, and this may not be correct, that Pinellas County has cut their taxes for at least 10 straight years.

So what does this mean? Will counties that have cut their tax rates be exempt from some the cuts? Hardly.

It seems that Rubio and Pruitt are going to punish local governments for something totally beyond their control: escalating property values. “Taxpayers who have experienced the greatest increases in their taxes” will be commercial property owners in high-value and high-growth counties. In fact, a significant portion of homestead property owners have not seen a significant increase in their taxes because the Save Our Homes cap was in place prior to the start of the hot real estate market.

Thus, perhaps the joint letter should have read:

Providing immediate tax relief on this November’s tax bill was the first agreement reached. Cities and Counties will be required to cut their property taxes. The level of cuts will be based on a formula tied to the amount of aggregated property value increases in each jurisdiction over the last five years.

Those jurisdictions whose aggregated property values have grown the most on a per capita basis will be required to reduce them the most. Similarly, cities and counties whose aggregated property values have grown the least on a per capita basis will be required to reduce taxes less. We believe it is important to take into account local governments’ past behavior regarding property value increases, and also to grant the greatest amount of relief to taxpayers who have experienced the greatest increases in their property values.

From reading today’s stories in the leading Florida daily newspapers, it doesn’t appear that this analysis was explored.

Our Legislators need to remember the formula:

Millage rate X property value = property taxes

If “it is important to take into account local governments’ past behavior,” then there needs to be a recognition of what is and is not within the realm of local government control. I’m not saying that we don’t need property tax reform — we do. I’m simply saying the legislature needs to remember what is ultimately responsible for the hue and cry: a great real estate market from 2001 to 2005.

About Jim Johnson

Editor and publisher of The State of Sunshine.
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2 Responses to One Question on the Tax Reform Proposal

  1. Mr. G says:

    Jim, my friend, you’ve got it all backwards. County’s set the total amount to be collected (their budgets) and then set millage rates to match it. The total amount collected is predetermined by the counties. Taxes are too high because counties set them too high.

    I’ve put up a more detailed response at PEER Review.

    http://www.peerreviewflorida.com/fl/2007/06/counties_the_ca.html

  2. Jim Johnson says:

    Mr. G –

    Although this is the first comment, I have had a few people educate me on the process — heck, I worked at the state level, not the local level.

    Thanks for the clarifying post at PEER Review… I will comment there.

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