Q&A – Florida Property Tax Reform
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Today’s entry: @brianmuddradio Can’t wait to hear your proposal to a possible amendment to our property taxes. The wording and messaging for marketing purposes will be crucial. NOBODY WANTS TO PAY THE PROPERTY TAXES WE PAY IN SOUTH FLORIDA!!!
Bottom Line: For as long as I’ve been doing this, I’ve advocated checking your property tax assessment annually when you receive your proposed property taxes. Much like federal income tax withholding, property taxes for those with mortgages often aren’t fully understood as the money is allocated via escrow. This is also true of those who rent and thus don’t have to directly pay for property taxes, but certainly are as part of monthly rent payments. Make no mistake. About $5,000 annually for the average South Florida household is a big deal and that’s about what we’re now paying this year. Last week when I highlighted property taxes and property insurance as Florida’s biggest issue right now, I heard from several people who were surprised to learn that South Florida’s property taxes were now among the most expensive in the country.
In case you missed it – Broward and Palm Beach County’s property tax rates are now more expensive than 95% of the country and Miami-Dade is more expensive than 97.5%. The state of Florida is tax friendly, however South Florida isn’t. And where do the lion’s share of those expensive property taxes go? Schools. The same school districts which continue to violate state law by preventing parental rights and are using our tax dollars to do it. That’s rubbed a lot of people the wrong way. But perhaps this adversity can be a catalyst for positive change. I discussed this prospect last week with Lt. Governor Jeanette Nunez, who was receptive to the notion. It makes sense. The current system is older than the state of Florida. No kidding. The ad valorem tax was created in 1839 and Florida wasn’t founded until 1845. The next related factoid... It wasn’t codified in the state’s constitution for another 40 years and when it was – numerous exemptions to having to pay property taxes in order to retain property included, widows and disabled veterans.
The fact is change has been a consistent part of Florida’s property tax story. Eight significant changes to property taxation have occurred since ratification, including homestead exemptions and TRIM notices. Many others have occurred as recently as this year as two amendments passed just last November adding to the length of time you can transfer your homestead exemption from one property to another along with an additional reduction in property taxes for surviving spouses of deceased veterans. With two Constitutional Amendments addressing property taxes having passed just last year, it’s certainly possible to make similar, if not bigger changes through the process in the future. As for what I’d propose doing... There’s one big one for me. I don’t believe property should be able to be reposed for unpaid property taxes except under extraordinary circumstances. As I’ve stated before, do you ever really own your home if it can be taken away from you by the government for unpaid taxes?
Without a state income tax, property tax is actually the largest source of local and state funding at 36.4% - a shade higher than revenue generated by sales tax at 36.2%. I suspect with the recent collecting of online sales tax, for all purchases in Florida, it will push past property taxes for the top spot. That may provide added opportunity to limit imposed property taxes. I'd like to see the system reformed so that it would prioritize property rights while limiting taxation. As for what I’d specifically propose:
- Limiting all property tax increases, regardless of property type or homestead status and regardless of taxing authority, to the rate of inflation as opposed to property value assessment increases
- Limiting the ability for governments to reposes a homesteaded property for unpaid taxes in favor a tiered approach which would limit use of the property by cutting off utilities and services provided through tax assessments, in addition to privileges such as a driver's license until taxes are paid
On the first point, my analysis last week showed that in the most recent five years the total inflation rate was 8.9% but Florida’s average homesteaded property tax bill rose by 16% with the average non-homesteaded property rising 35%. That’s an enormous savings. Additionally, it shows how out-of-whack the revenue flow to governments/taxing authorities have been and continues to be given that the cost of providing services is impacted by inflation as opposed to property values. My second idea is one that pressures homeowners to pay their property taxes, while paying additional deference/flexibility to homeowners. I’m sure there are other valid ideas as well. The point is to get the conversation going.
As has been illustrated, our current system is prioritizing governments over homeowners. At a minimum that should be neutral, and it shouldn’t be too much to ask.