Q&A of the Day – Property Taxes & The Impact of Snowbirds to Florida’s Economy
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
iHeartRadio: Use the Talkback feature – the microphone button on our station page in the iHeart app.
Today’s entry: I have contacted Gov DeSantis, congressmen and senators with this thought. What are the odds they will consider my idea? My thoughts regarding real estate taxes. Rather than eliminate real estate taxes, why not raise the exemption to 500K? That would be a large enough window for most average homes to benefit.
My concern is that without a cap, all the extremely wealthy part time residents will become homesteaded. The multi-million dollar homes will be exempt. There is no way that increasing the sales tax will fill the gap. The poor and middle class will feel the brunt. Wealthy shop everywhere, not just their home state. Middle class and poor shop at home. Tourists will spend less. There will be less jobs.
Bottom Line: Today’s note from a listener in Loxahatchee provides an opportunity to address a few dynamics in play as the debate about property tax relief continues to heat up in advance of the start of January’s legislative session. I’ll address the questions in the order they were presented starting with contacting elected officials for the purpose of advocating your preferred approach for property tax relief.
Governor DeSantis is certainly a key player as he’ll need to sign off on any proposal passed by the legislature in order for it to make its way to next November’s ballot for voters to consider as a proposed constitutional amendment (or the legislature would have to have margins sufficient to override a potential DeSantis veto). As to whether he’ll be receptive to your idea? Realistically, it’s unlikely. He’s been clear that he’s opposed to homesteaded property taxes, and I’ve never seen DeSantis backdown from a firm policy position he’s advanced. In fact, the political PAC that specifically backs him is the “Never Back Down PAC”. That’s not to say that you shouldn’t reach out to the governor’s office to advance your position; however, it’s extremely unlikely to have an impact on this issue.
As for contacting members of congress, that won’t prove to be helpful here. Property taxes are a state and local issue. For that reason, you want to reach out to your state representative and state senator with your thoughts. Now about the thoughts proposed today...
If a proposed property tax exemption of $500,000 were adopted, 61.1% of Florida’s homesteaded properties would be completely covered by the exemption. So, you’re right in saying that most/average homesteaded Floridians would currently be covered with your plan. Now, beyond that, there’s likely more to the story than perhaps you’ve accounted for.
You’ve cited a concern that if homesteaded property taxes were eliminated, part-time residents would move to have their properties homesteaded to avoid property taxes. This is likely true. You likely would have some non-Florida resident homeowners seeking to become full-time residents to be able to apply for a homestead exemption. However, there are two important dynamics to be mindful of. The first is that if someone is wealthy and can potentially become a full-time resident as opposed to part-time, they’re probably already doing it. For most high-income earners, the ability to avoid state income tax in addition to taking advantage of the existing homestead benefits already provides a tremendous incentive for those who’re able to become full-time residents of Florida – to do so. Therefore, the additional universe of part-time residents who could potentially become full-time residents in our state for tax purposes (meaning living/working a minimum of 183 days per year within the state), is likely a small group. And that leads to the next related consideration...
The impact on the local economies would be meaningful if Florida converted more part-time residents to full-time residents. I’ll explain. Last year a study was conducted of snowbirds seeking to understand their habits and economic impact. Here’s what was found:
- Florida’s population increases by approximately 5% during season (bigger impacts in South Florida obviously)
- The average snowbird stays for approximately 4 months
- The average snowbird spends about $6,000 per month within the state while they’re here
- Approximately 1.6 million jobs statewide are directly attributable to snowbirds
The notion that wealthy part-time residents are more likely to spend money elsewhere as compared to locally is incorrect. Wealthy residents are actually more likely to patronize local businesses, and more frequently, than those of average means.
The average Floridian has about $1,430 per month in discretionary income after paying the bills. Even if 100% of that were spent (as opposed to have any savings), and even if 100% of the spending took place with businesses within Florida, it still wouldn’t equal the economic impact of the average snowbird who is here for four months (in fact it’d would be thousands of dollars short of having that impact). In other words, snowbirds/part-time residents play a significantly outsized role in providing a positive economic impact due to the typically large amount of discretionary spending they bring with them. If we were able to encourage more part time residents to become full-time residents, meaning they’d have to live in our state a minimum of two months longer than they currently do, the added economic impact from the additional time/spending that would take place here would be massive.
In today’s dollars, if the average snowbird were to stay in our state for only an extra two months, we’d see $60 billion annually in direct additional spending within our state with an estimated 800,000 additional jobs that would be created. What’s more is that if property taxes were no longer a burden, there would be more discretionary spending ability still, which would likely result in a larger economic impact than what’s suggested in that example.
As for the concerns regarding revenue shortfalls. Governor DeSantis’s plan doesn’t call for raising sales tax rates to compensate for lost revenues but instead, a focus on less local government spending. As I’ve illustrated previously, this is entirely doable. Homesteaded property taxes only account for 15% of local government tax revenue.
In my analysis at the time of the Palm Beach County DOGE audit, I found that adjusted for inflation and population changes, PBC government spending had risen by greater than 15% over the prior five years. A figure that’s higher than the homesteaded property tax revenue. In other words, to the question of how could they run the government without the homesteaded property taxes? The answer would be the way they did in 2019. DeSantis has also stated that the state could pick up any shortfalls annually for rural counties with “budget dust”, meaning the price is so low it wouldn’t be significant.
This isn’t to say that your idea doesn’t have merit, that perhaps picking a point like $500k for an exemption where most residents would have relief, may be the way to go... I think your idea or something similar is more likely to happen than Governor DeSantis’s (which isn’t among the eight proposals recently rolled out be the legislature). It will be interesting to see what will be with the various property taxes proposals next year.