I read with interest Jerome Stockfisch’s article about a state income tax in yesterday’s Tampa Tribune.
The article starts with a box on page one essentially saying that a homeowner who pays $3000 annually for property taxes could instead pay only $2870 if we reduced property taxes and imposed a minor income tax. Sounds great, right? So what would it take for a citizen to reap this $11 per month windfall?
First of all, the important numbers in the article:
• The $3000 current annual property tax
• The $800 new state income tax
• The $2070 new annual property tax
• The $2870 new, reduced annual tax paid (property plus income)
Let’s start with the annual property tax. For a homeowner to be paying approximately $3000 annually right now in Hillsborough County, the taxable value on their home would need to be around $150,000. Assume that they have the homestead exemption and they are taxed on $125,000. Obviously, the millage rate varies, but let’s take a number like 22 mills. This would yield an annual charge for ad valorem taxes of $2,767.66. Add to that $337.00 in non-ad valorem taxes and you get $3,105.35. Close enough to the article for the purposes of this discussion (I used real numbers from a real house in Hillsborough County).
Now that the math is out of the way, let’s look at reality. The house I used was purchased several years ago. A family with two children and two incomes who purchased the same house today would incur significantly higher taxes. Due to the inflated real estate market, that house would likely cost a new buyer $317,000 (based on a similar home sold three doors away). Thus, a young family purchasing the same home today would be taxed at twice the rate. They therefore would pay $6,434.51 (assume they homestead the property) in ad valorem taxes.
I think this is a much more likely scenario. Stockfisch’s $150,000 taxable value seems unrealistic. Anyone who has looked at the housing market in Tampa can verify that.
Next, let’s turn to the earnings. The article discusses a household earning $55,000 per year. Most families I know need two incomes at this level to make ends meet. The common scenario of two wage earners would easily put the family paying more. Let’s just assume that the spouse earns $35,000 per year. Even at a two percent tax rate, that costs the family another $700 per year. Likely $35,000 plus $55,000 ($90,000) would put the family in the “upper income” bracket that the article tells us would be three percent. Now we’re at an additional $1050 per year. Add that to the articles new, improved $2,870 per year and you get $3,920!
This rant has already gone further than I had wanted, so I won’t even bring up the fact that a state income tax would also require the state to create infrastructure, hire employees for administration and enforcement, etc. I also won’t mention the additional burden to the tax payer to file for something they currently don’t do each year. Or employers to report earnings to the state. Or for employers to withhold earnings for the state income tax…