Florida Taxes and Government Services

A lot of stuff is being published in newspapers all across the state regarding the upcoming vote on Amendment 1 which would provide some small relief in property taxes. For more info on the Amendment, check out Henry's posts at Babalu here and here.

The big issue is whether the tax cuts would be enough to kick-start the economy and alleviate the housing market woes. My answer to that is: no, it wouldn't. It's simply not enough. Granted, the portability option would give incentive for those trapped in their homes due to high property taxes to get back in the market. While that would help to stabilize the real estate market freefall, so to speak, it's not the cure to the disease. Unless serious property tax reform takes place (not just this band-aid), the housing market will continue to struggle and young, productive people will leave the state. The 1.35% cap being passed around in petitions would be a bigger help, but event that doesn't go far enough in my book. Get rid of the Save Our Homes, all exemptions, and tax at 50% of market value. It would represent an increase in taxes for many folks, not just right off the bat but on a year-to-year basis, since it would be tied to market value and not held artificially by Save Our Homes. However, it would also make it easier for new buyers to get into the market and for current owners to upgrade/downgrade, and would level the playing field significantly. Honestly, if I were king for a day, I would push for 25% or even 0%, but I realize these are unrealistic in today's political climate.

Local governments, of course, don't like Amendment 1 one bit. Check out this story in the Sun-Sentinel on how Broward County officials are already talking about cutting services, etc. etc. Never mind the fact that county has received a big increase in revenue from, you guessed it, property taxes:

Broward County and its 31 cities reaped an increase of $1.4 billion in taxes because of the rapid rise in property values between 2001 and 2006. When the Legislature last year ordered them to roll back tax rates to help bring relief, the county and cities reduced tax collections from property owners by just less than $62 million.

Government spending is out of control, and it's hard to say that improvements in services have followed at the same rate. Again, government has shown that it can't be trusted to handle our money appropriately. The Sun-Sentinel's sister newspaper, the Orlando Sentinel, is in favor of Amendment 1, but it's reasoning is interesting:

Amendment 1 isn't just about cutting taxes. It is about controlling government spending. It is a reality check for local governments that feasted on escalating property values over much of the past decade instead of lowering tax rates.

As property values rose, tax collections soared. Levies doubled between 1997 and last year, including 42 percent in just three years. Property taxes grew three times faster than growth in population and inflation combined. At the same time, government services didn't seem to get any better. What a waste.

I hear you, Orlando Sentinel, but we're putting too much faith in government to make the right cuts (fat), which they've proven time and time again that they can't or won't.

Finally, there's the Miami Herald article which has Governor Charlie Crist promising to offset tax cuts by increasing school budgets.

The proposed budget includes $138 million to offset the potential lost revenue if voters approve Amendment 1. It also includes $125 million more for teacher merit pay, $100 million for middle-school physical education, and $847 million for new teachers and new classroom space to meet class-size requirements.

But the spending package relies on local school districts to collect an additional $337.8 million in property taxes next year to pay for the hikes. Under that plan, if property values continue to decline as they have the past couple of years, school boards might have to raise their tax rates.

Crist would not say how he would find the money to increase school-district budgets at a time when the state economy is faltering and there could be a $2 billion shortfall in the overall budget for the next fiscal year, which begins July 1.

The governor has previously said he will make $350 million in cuts in the $70 billion budget and raise another $870 million in new revenue by taking money from the endowment devoted to healthcare spending from the tobacco settlement, increasing gambling revenue from the Lottery, and collecting $100 million from the casino deal with the Seminole Tribe.

Hmmm. Goes back to the point I was making at the top about government spending. I thought taxes for school districts were exempt from Amendment 1 (I could be wrong). I also thought that state government could decide what percentage of taxes is taken out for schools, regardless of how high or low the overall tax rate is. It's not a set value forever and ever. This shows how local and even state government can turn what's a savings into more taxes. They could increase the millage rate, for example, to offset the lower property tax values.

Very interesting, to say the least, and for now I plan on voting NO and pushing for bigger and better tax reform.