One House property tax proposal stands out above the rest

Previously we discussed the need to repeal and replace the Required Local Effort property tax. This is the cleanest, fastest, most effective way to reduce property tax bills around the state by as much as 50%.

Since then, the House has presented eight bills (seven constitutional amendments and a general bill). While there are pros and cons to each of the proposals, HJR 207 stands out as the best proposal to increase the savings to homestead property owners.

This proposes to create a third homestead exemption of 25%, above the two existing $25,000 exemptions. When the original homestead was adopted in 1934, every homeowner received a $5,000 exemption on the value of their property for ad valorem taxation; at a time where the average home value was around $4,000.

The purpose was clear: to make homeownership tax free for nearly every Florida resident! However, in 1934, we were barely dreaming of a public highway system; today, just our cities and counties maintain roughly 110,000 lane miles. Public works such as water, sewers, libraries, parks, mosquito control(!); the list goes on and on.

These were either mostly private functions or completely nonexistent. Suffice it to say that it was far easier to balance a budget without taxes when there were no public services.

So where does that leave us? Just on inflation, that would mean a base exemption of $125,000. But frankly, this just won’t work, as inflation will continue to rob us of value moving forward and for our rural counties, they will immediately become dependent on state budget transfers to operate their core functions.

Therefore, the simplest solution is to convert the homestead benefit to a percentage basis. In so doing, we eliminate the inflation tax and bring equity between our rural and urban counties. The House proposal is for 25% as a third “layer of cake,” but it still excludes the school taxes from being affected, as well as creates a new constitutional mandate for law enforcement.

In tax policy, the simpler is always better. To that end, a major improvement would be to drop the new mandates, make the homestead apply to every property tax line, including schools, and to simplify the percentage homestead in a way that also doesn’t retrograde the benefit on homes with less than $200,000 in value.

There are still more innovative ideas to explore, such as Milton Friedman’s “least bad tax,” being the land value tax wherein improvements (houses, barns, docks, etc.) are not taxed at all, only the land underneath.

Or for example, Speaker Daniel Perez recently raised the issue of structural government reform. When one considers that Florida has five water management districts, seven Florida Department of Transportation districts, 20 judicial circuits, 67 counties, over 400 cities, and thousands of special districts, no one can seriously contest that the potential to reduce duplication of services and distinguish between general revenue taxes and tax for service must exist.

Comprehensive restructuring of this magnitude will have to wait for another article. In the meantime, HJR 207 provides an incredibly powerful starting point for homestead property tax reform, and I am hopeful that this concept will gain greater traction in the coming months.

___

Matt Caldwell currently serves as the elected Lee County Property Appraiser and served in the Florida House from 2010-2018.