18 September 2006

An extremely long post of no interest to non-Floridians

Property taxes are on the rise in Florida. No surprise there. It's election season, and all the politicians are proposing solutions. No surprise there, either. None of the solutions being proposed are anything other than giveaways to certain blocks of voters. Again, no surprise. Are we starting to see a theme?

The Crist solution is, like Crist, simple and appealing yet likely to cause significant problems down the road. Crist wants to offer counties and cities the opportunity to let voters choose whether to expand the homestead exemption from $25,000 to $50,000. Most voters would probably approve this, but most counties would not wish to give them the option.

If enacted, the expanded homestead exemption would reduce the total tax burden on homeowners; some homeowners would in fact drop off the tax rolls entirely, especially older homeowners in south Florida's vast trailer parks. Of course, when you reduce tax receipts, you must do one of two things: 1) eliminate or reduce government services, or 2) raise taxes on somebody else.


Team Crist says that "local governments need to live within their means." State government apparently needn't bother.

Actually, there is ample waste at all levels of government to absorb a loss of tax revenues. Trouble is, governments don't usually cut waste first, because they don't believe there is any. So services suffer. Property taxes, in Florida, fund most of the local budgets for county governments and schools. Reducing property taxes means less money for roads, sewers, schools, and the like. People like roads and sewers and schools. In fact most people in Florida complain primarily about roads and schools. So Crist's plan is to reduce the available tax revenue for improving the roads and schools.

Of course, Team Davis has determined that the best thing to do is convene a large committee of people to sit around and talk about the property tax crunch and see what might be done about it. This is the idea put forth by the current governor, who once created a Task Force on Long-Term Solutions for Florida’s Hurricane Insurance Market that he then stocked with a supermajority of insurance company spokesmen, lobbyists, and executives. It is not surprising that said commission failed to find any long-term solutions for Florida's hurricane insurance market that didn't involve homeowners and businesses paying lots of money in insurance premiums. I can imagine the governor's Task Force on Long-Term Solutions To Florida's Property Tax Nightmare achieving a similar result. That said, if we put all the politicians in a room somewhere to talk about property taxes, at least they can't do anything else to screw us while they're in there. And there's always the chance that a giant sinkhole could open up and swallow the room and politicians whole.

The problem is that the state's voters decided in 1992 to give themselves a tax break by enacting a constitutional amendment that allowed us (I didn't vote but I am a homeowner, so I'm guilty, too) to pay taxes on an artificial appraised value of our property that could be no more than 3% higher than the previous year. Thus over the past five years while the real value of taxable property in Florida has risen by over 100%, the taxable value of said property has risen by only 15% for all Floridians lucky enough to have owned their homes and not moved in that span of time. But for those Floridians who've moved in, or moved from one part of the state to another, the 3% rule has not applied. In some cases next-door neighbors may have tax bills that vary by a few thousand dollars. Businesses, two, are feeling the pinch of rising property values.

What to do, what to do. Convene a committee? Give the people who are already not carrying their weight an even bigger tax break? Does anybody seriously think either of these ideas are the solution?

Eliminating the 3% "Save Our Homes" giveaway would allow municipalities and counties to reduce the overall tax rate. Homeowners currently under the plan would face a fairly sharp rise in taxes, but the overall property tax rate would come down, reducing the burden which currently falls disproportionately on new residents (some of whom are lifelong Floridians who've moved recently). The change could be phased in gradually to avoid shocking the budgets of long-term homeowners, say over three years. At the end of that time overall tax rates would be lower and all homeowners and businesses would share the burden of property taxation equally. Only once we're all in this together can we actually expect any kind of reasonable discussion about how to drive down tax rates overall.

Team Crist claims growth can be made to pay for itself. I dispute this notion, but this is already a long enough rant and I'll save that one for later. But let's keep it on the table as an idea. If the idea works, then as counties and cities grow, they should be able to meet all demands of the growing population without raising taxes to pay for expanded services. But if we don't eliminate "Save Our Homes," property taxes on newcomers will remain significantly higher than on their established counterparts. This could serve to reduce growth pressures, but this is Florida and I don't think that's a realistic outcome. However, because municipal property tax rates are capped by the state, growth will have to be sufficiently high in all areas across the state to allow counties and municipalities to pay for all necessary services solely by charging newcomers the full legal tax rate at the full appraisal of their homes. This means home values will have to continue to increase--and of course each newcomer immediately enters the Save Our Homes program, so even if property values increase 15% per year (July home prices were only .9% higher than in July 2005), each new home's taxable value will be only 3% higher next year.

Several counties statewide, largely the smaller and rural counties with lower growth and property value growth rates, are already at the state cap for property taxes. Take away another $25k from every appraised property in these counties, which have cheaper property values than more urban, higher-growth counties, and they will no longer be able to meet their minimum requirements for basic services. So Team Crist's proposal might sound great to those of us who live in big counties or out in the 'burbs, but it's actually a death sentence for smaller and rural counties--unless, of course, they encourage vast new housing subdivisions and eliminate agricultural land. I don't think this is Team Crist's secret plan, but it could be an unintended consequence.

Florida has chosen to fund all government services without an income tax, which I think is terrific. This places a large burden on property owners and consumers who must pay higher than average property tax and sales tax rates (we also have bed taxes and other taxes that take advantage of tourists, as well we should). If we assume that government must have money to function, then it stands to reason that we ought all to pay into the pot fairly. Property should be taxed at its real value. If we tax all property at real value, the overall tax rate can be lowered without the spectacle we've seen in the last week of angry citizens converging on city halls demanding lower tax rates--always without cutting services, or at least not the services the angry citizens themselves make use of.

Until we tax all property at its real value and all taxpayers are facing the same relative burden, we can't talk seriously about how to reform the tax system. Once tax rates have a chance to stabilize, we'll know whether they're still too high. Then we have to start the real discussion about what services we wish to eliminate to reduce taxes. It's all well and good to say that local governments should live within their means, but that's just a way of saying you don't wish to make the hard decisions about what programs to cut and what to keep.

People who want low taxes have to learn to live with less government. I think less government is great and we should have a long public dialogue about what services the government should provide and what we should handle ourselves. What we can't continue to do is this "big-government conservative" notion that we can cut taxes and raise spending and somehow everything will be all right. Unlike the federal government, Florida and its counties and municipalities are required to balance their budgets every year, so wanton deficit spending is not an option. It is irresponsible for politicians to campaign on claims that we can reduce our taxes without also describing where and how government expenditures will be cut. It's very easy to decry government waste, but have you noticed how rarely the politicians complaining about it manage to find specific examples of it, and then eliminate them? I'd have a lot more respect for Team Crist if they could tell me what they really meant by "live within your means."

1 comment:

smittygirl said...

Side note: You MUST post a review on this Headless Chicken Management book you are reading... I think I might have to read this one myself, considering the current absurdity that my current supervisors call "managing."