TALLAHASSEE, Fla. – May 11, 2007 – In an opinion piece published today in The Orlando Sentinel newspaper, Florida House Speaker Marco Rubio signaled a shift in the House’s approach to property tax reform, introducing the concept of a homestead exemption based on a home’s value.
During the regular session, the House, under Rubio, pushed a property tax reform plan that would get rid of property taxes for homeowners in exchange for a sales tax increase as high as 2.5 percent. Rubio says that proposal stemmed from three House goals: reduce local government taxing and spending, provide significant and immediate relief to taxpayers, and give Floridians statewide the opportunity to vote for meaningful and comprehensive property-tax reform.
However, Rubio also says the House “would support any plan that met those three goals and was more focused on the taxpayer than the tax collector.“During the past few weeks, Rep. David Simmons (R-Maitland) suggested an idea that met the House’s policy goals, and offered an opportunity for opponents of the House plan to reconsider their objections,” Rubio said in today’s editorial. “The House is now considering a variation of (Simmons) idea of dramatically increased homestead exemptions based on a percentage of the value of the home.”The system works similar to the IRS’s tiered income tax system.
All homes would have the same tax savings on the first $300,000 of value, for example, giving workforce housing the maximum deduction. But a home’s proportional property tax savings would go down for homes worth more. Rubio offers an example, which seems to be his preferred amount of tax shielding, though he also seems willing to negotiate with other House members as well as the Senate. In the opinion piece, his plan offers substantial savings to most Florida homeowners along with significant cuts to local governments’ coffers.
Rubio’s example calls for 80 percent of a home’s value to be shielded for the initial $300,000. On the next $700,000 of value, 70 percent would be exempt. Any home worth less than $1 million but more than $300,000, then, would be taxed at two different rates. Homes worth more than $1 million would pay proportionally more – a tax exemption of only 30 percent for the home’s value that exceeds $1 million, and a total property tax bill calculated using three different tax rates.
Examples using Rubio’s numbers:1. $300,000 (market value) home: 80 percent shielded from property taxes, making the taxable value $60,000. The county or city’s millage rate would then be applied to the $60,000 only.2. $1 million (market value) home: 80 percent shielded up to $300,000 as it was in example No. 1, for $60,000. That must be added to a taxable value of $210,000, calculated by taking the remaining $700,000 ($1 million minus $300,000), which has a 70 percent shield. Add $210,000 and $60,000 to get a total taxable value of $270,000.3. $3 million (market value) home: The two taxable values in No. 2 apply for the value of the home up to $1 million, for $270,000. Add that to $1.4 million, calculated by taking the remaining $2 million and shielding it by only 30 percent. $1.4 million plus $270,000 equals a taxable value of $1.67 million.
For homesteaded properties, the Save Our Homes amendment’s tax savings could go away, but Rubio claims that 90 percent of these homeowners would actually end up paying less in property taxes under the new plan anyway, and “the average beneficiary of this approach would see his or her tax bill cut in half.” Commercial and non-homesteaded property owners would be taxed under a similar approach under this idea. Rubio did not recommend a specific tax rate, but it would probably be higher.
According to Rep. Dean Cannon (R-Winter Park), head of the House’s committee charged with working out a property tax compromise bill with Senate leaders, the general concept of tying property-tax cuts to a percentage of property values “seems to be something that we both (House and Senate) have economic and philosophical support for.”Two key issues will impact any compromise, however – the drop in tax revenue local governments would be expected to absorb, and whether a tax increase elsewhere, such as sales taxes, would be needed to make up for any deficit. “If it’s such a huge revenue impact that we just have to go back to the drawing board and make up for it with sales tax, we’re going to have a difficult time coming together,” says Sen.
Mike Haridopolos (R-Melbourne) the Senate’s lead negotiator. Still, Haridopolos did not reject the plan altogether. Cannon says there is beauty in the methodology of a percentage-base property tax because “you can tailor it. … It doesn’t necessitate a replacement revenue source altogether. It also doesn’t rule it out, either.”
© 2007 FLORIDA ASSOCIATION OF REALTORS®
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