Call it the Great Home Heist of 2007

The proposal to double the homestead exemption from $25,000 to $50,000 on Florida homes is a joke. There, I said it.

But it’s hard to laugh at this particular joke. In all the debates about property taxes, no one seems to mention that the $25,000 homestead exemption, effective since 1982, has been The Incredible Shrinking Tax Break for 25 years. When the exemption was increased from $10,000 to $25,000 between 1979 and 1982, the median home price in the Tampa Bay area was about $50,000. In other words, the exemption cut the taxable value of your house in half. March forward 13 years.

In January 1995, when the complementary Save Our Home tax cap took effect, Tampa Bay area homes sold for a median price of $71,000. The homestead exemption exempted about 35 percent of a home’s value. Observe our plight today: Based on September’s local home sales price of $200,700, the value of the exemption is only 12 percent of a typical home’s value. What seemed like a governmental gift in 1980 is the Great Home Heist in 2007. Home values have risen through the roof, but the state hasn’t indexed the exemption for inflation.

Instead, the Legislature passed Save Our Homes, approved by voters in 1992. SOH caps the increase in taxable value of a primary residence at 3 percent a year. When you move, you lose the accrued savings and are taxed at your new home’s real value. Florida Tax Watch flagged the unfairness of SOH back 1992. People mistakenly think SOH is a tax cut. It’s not. It’s a tax shift, a shift to first-time home buyers, businesses, vacation homes and anyone who wants to change his or her address. To its credit, the Legislature tried to rig a fairer tax structure this year. The homestead exemption would have expanded to 75 percent of a home’s value up to $200,000. The state would have taxed a $200,000 house as if it had been worth $50,000. Voters feared the change. A judge objected. And the Legislature hatched this turkey of a compromise to double homestead to $50,000.

On my house, it’s going to cut $200 off a tax bill of $6,200. The sound you hear is laughing. And it’s not the joyous variety.

Comments

[Ronnie]

This is a laughable tax plan that does nothing except provide portability of SOH. Even that will probably be found unconstitutional (according to State lawyers) by the Federal Courts. The tax cut that we were supposed to receive this year with the State mandated rollback did not appear. My taxes went up as did everyone I know.

The fact is that our economy is in dire straights. The housing market needs a real kick start that should include tax incentives to all the baby boomers who are beginning to retire. Local and State governments need to prioritize spending and reduce our taxes. If local governments want the State to butt out, then stop spending like there is no limit to money. People are struggling to make ends meet. They can’t afford extra expenses. Local governments need to cut taxes themselves.

None of this will happen and in the end citizens’ initiatives will do the job for them. All three voters in my household have signed the petition for tax relief at www.cutpropertytaxes.com. If our governments won’t do it, the people will.

[1st Time Home Buyer]

first time home buyers may look for small incentives like this. In NC we dont have any exemptions!

[Jonathan Roy]

I really liked the original plan. It wasn't perfect, but it'd save a lot of people a significant amount of money. The new plan will let people afford to move if they have been in their home a long time, but that's about it. The bummer is that in times like this, the prior substantial drop would be a great help to people facing arm resets and/or foreclosure.

[Jonathan Roy]

Actually, what happens if the voters don't pass this change? Do they try again next year, leave it alone long-term?

I like portability (I bought in 2001 so I'm trapped right now), but the original plan was pretty similar to portability for me since any new home I'd downsize to would probably only cost $200K or less, giving me the max benefit (on a % basis).

In fact, under the old plan, if I downsized I'd pay less in tax than I do now under a 6-year SOH.

[Mark Eicholtz]

Consider the distance between the property tax (and homeowners insurance)proposals made during the last campaign season and this latest proposal. It's stunning. This effort amounts to nothing more than political cover. Shame on these dishonest politicians - including the Governer - for whom I voted. Charlie, you have proven to be a politically impotent leader.

[Ed Cohn]

The only mistake in your article relates to the origins of Save Our Homes (SOH). It did not originate in the legislature. Our legislature had nothing to do with it save for opposition and the turning of a blind eye to the problem. It came about as the result of a citizens' initiative, led by the Lee County property appraiser, Ken Wilkinson. The voting citizens of Florida needed the relief and had to provide it for themselves.

What is said in the remainder of the text is true, but the new proposal should be regarded as the first step in a long overdue process/program of tax reform. Fortunately, the Florida Taxation and Budget Commission is currently meeting. They are empowered to place proposals directly onto the Nov. '08 ballot. Hopefully, they will pick up the gauntlet and continue with meaningful reform where our legislature left off. There is always the possibility that the legislature itself will do more in upcoming sessions next year.

As regards the responder's comment regarding the curent proposal being unconstitutional, the following should be noted. Our SOH was largely based on the California Proposition 13 of 1978. It includes both tax limitations and a portability feature. The measure has been challenged all the way through the U.S. Supreme court and has withsood the test of time. It still continues to serve the needs of the citizens of California.

[Jonathan Roy]

That's interesting Ed, I've never heard mention of the CA law. Of course, when it was enacted in 1978 I was 6 years old. :)

http://en.wikipedia.org/wiki/California_Proposition_13_(1978)

[sandra]

Why not abolish SOH and reset the millage rates to be reflective of current day values?

The millage rate for Pinellas county is .023 and though it's reduced slightly from citizen pressure last year, it's antiquated and based off of home values worth only a fraction of today's true market prices.

When your house was only worth 50k in 1998, even without the 25k exemption, you'd owe $1600 in taxes. Less than 10 years later, without SOH and because of the millage rate, your house is now going for 150k, resulting in $3900 in taxes. The millage rate should have been adjusted along with the market. Instead, once homesteaders became locked in, they became complacent and didn't care what went on in city hall, (Can you blame them?) while cities sock ed it to new buyers, businesses & non-homesteaders.