Florida Gubernatorial Candidates on Property Tax Reform

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In Florida, both major-party gubernatorial candidates have now unveiled their plans for reforming Florida property taxes.

Democratic candidate Jim Davis wants to cut the state's property taxes by $1 billion. The mechanism? An across-the-board cut in the level of local property taxes that the state mandates local governments must levy each year. So Davis's plan won't change the distribution of property taxes-- it will simply reduce everyone's taxes (homeowners, snowbirds, and businesses) by about the same percentage. Davis' website has more here.

Republican candidate Charlie Crist has a two-pronged plan. First, Crist wants to double the state's homestead exemption, which currently shelters the first $25,000 of an owner-occupied home's value from tax, to $50,000. Second, he wants to expand the state's absurd "Save our Homes" tax cap (the defects of which we have cataloged here and here), which limits the amount by which a home's taxable value can grow in each year to 3 percent, by making it "portable."

[A little background on the "portability" concept: right now, Florida homeowners accumulate more and more tax benefits from the 3 percent cap in each year they live in their house, gradually driving a big wedge between a home's actual market value and its (much smaller) taxable value. But under the Save Our Homes rules, when you sell your house and buy a new one, the gap between actual value and taxable value goes away, and the taxable value of your home is reset to equal what it's actually worth.
This obviously means that for long-term residents, selling their home has a downside: a big hike in property taxes. The sensible answer is to get rid of "Save Our Homes" entirely, so that every home in the state would be taxed based on its actual value. Crist's answer is to say that long-term residents will get to keep their tax breaks when they move.]

Each plan has its shortcomings. Crist's plan has two big ones: it would perpetuate the biggest inequity in the existing tax system (that is, the Save Our Homes tax cap), and (as the Miami Herald's Mary Ellen Klas ably points out) is not actually constitutional right now. So even if the Crist plan were a good idea, it couldn't get implemented for several years.

Davis' plan has flaws of its own. It too would leave the Save Our Homes plan in place. Its across-the-board tax-cutting approach basically asserts that everyone in the state needs a property tax break and that no individual group is any more "needy" than the rest. And both of these are at least contestable assertions.

Perhaps most troubling is that neither of these plans would add a much-needed measure of "ability to pay" to the state's property tax system. The ultimate injustice in the property tax is that it typically depends only on how much your home is worth and doesn't respond at all to changes in your income. So if your home's value goes up at the same time that you lose your job, you'll feel a lot poorer-- but the property tax will think you're getting richer and will tax you accordingly. Effective property tax reform figures out a way to ensure that when you're really poor, the property tax system recognizes your poverty.

If there's good news in these plans, it's that both candidates would move the state away from its historic over-reliance on local property taxes. But even here, there's bad news: in the long run, local revenues have to be replaced with something. Davis, at least, has made it clear that the state will pick up the slack from his $1 billion property tax cut, and has put forth a bold idea for raising the money: bringing back the intangible property tax the Florida legislature just finished repealing. At its peak, the intangibles tax (which was an annual property tax on stocks and bonds, and which has lately only applied to the wealthiest Floridians) did bring in close to a billion a year.

But bringing back the intangibles tax is almost certainly a political non-starter given that most of the legislature voted to get rid of it just this year. Of course, proposing an improbable revenue raiser is better than proposing nothing at all, which has been the approach of Crist so far. His property tax proposal (certainly more pricey than the $1 billion Davis wants to give back, although no firm price tag exists for the Crist plan) includes no offsetting tax hikes of any kind.

The bottom line? Neither candidate is taking the property tax bull by the horns: both would leave the Save our Homes initiative largely intact. What they're both doing-- proposing big tax cuts-- hardly requires much political courage. But Davis, at least, is showing enough backbone to discuss the hard part of fixing the state's property tax mess: coming up with a revenue source to pay for his tax cuts. It's a good place to start.

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