Tax plan panned in the Oct. 30 chat

Today's weekly live chat here on TroxBlog was dominated almost entirely by the topic of the Legislature's new property tax plan. Most commenters agreed that it doesn't do enough.

To read the transcript of today's chat, click on the "Comments" link of this announcement a few lines below. You'll see a page with what folks have had to say so far, and a space where you can still add your own thoughts.

Thanks to everyone who took part in today's live chat, and I hope to see you again in the future!

Comments

[Howard Troxler]

et's start today's chat with a couple of pre-field questions on the new tax plan:

I know" market value" and "assessed value "but what exactly is "just value" and who or what determines it? -- john belovitz

[Howard Troxler]

Dear John B.: For our everyday use, term "just value" means more or less the same thing. The tax assessment, set by each county's property appraiser, is supposed to reflect the "just" or fair market value of the property.

There is a lengthy and precise definition of "just value" in the state statutes -- that's where the wording about considering a property's "highest and best use" is part of the definition. I was gonna get you a link to the precise statute, but right now the Legislature's web site seems to be down!

[Ron]

I'm not sure which I am more disappointed in, the completed tax plan, or the way the Senate went about it.

The house plan was far superior and more fair than the one adopted.

[Howard Troxler]

Another pre-filed question:

If I own two homes, sell the first and shift my homestead exemption from one to the other, is my tax exemption still "portable"? I'll bet a lot of people are in our situation, deciding whether to get rid of one home and move into the one they're now renting out. -- Tom

[Howard Troxler]

Hi Ron! Yep, even the House's second plan still went deeper than the Senate's. My basic take is that this is a little sop to homesteaders and a 10 pct cap for non-homesteaders that actually doesn't do very much.

And the overall plan does nothing at all for the big run-up in values of recent years; this is all prospective.

[Howard Troxler]

Dear Tom: The precise wording of the amendment passed yesterday says you're eligible for the portable tax break by ESTABLISHING a new homestead -- it doesn't say you actually have to BUY another house to get it. So my reading is, if you "establish" a new homestead in your second house and sell your first one, your exemption is portable. (As always, consult a professional and don't just rely on what Some Idiot in the Newspaper says... :) )

[Bland]

Howard:

This is just fluff. This is not the type of tax reduction that is needed to spark real estate or protect the taxpayers. All the State may succeed at doing is changing the focus of this problem away from the Local Government to Tallahassee. This mess is not over.

Do you think a grass roots movement may evolve from this to eliminate property taxes by substituting an increase in Sales Tax?

The people want real relief now.

[Ron]

Once again, the non-homesteaders, first time buyers and businesses got almost nothing. (This is not sour grapes on my part, I'm a 10 year homesteader.) I will happily accept whatever tax reduction this provides me, but I'm not among the groups that need the most relief.

[Howard Troxler]

Bland, thanks for the comment. I DEFINITELY think there will be some further activity, both in the Legislature itself and via constitutional petition. There already is petition activity afoot.

I have to admit that this little tax package MIGHT help the real estate market a little, to the extent that folks no longer feel "trapped" in their homes because of portability.

If you can move into a bigger home without losing your existing tax break, or downside to that retirement condo while keeping the same proportionate tax break, then why not do it in an otherwise buyer's market?

[Howard Troxler]

Ron, the 10 percent cap at least provides SOME insulation for non-homesteaders -- although it is too late for the big double-digit run-ups of recent years.

[Bruce Cotton]

Hate to say it, but the legislature just put a band aid on a gushing wound, declared it healed and went home (maybe you could come back in a fe weeks to make sure the bleeding stopped).

What they failed to do in 2 special session and a regular session was come up with a long term solution that helped everyone to some extent.

[Howard Troxler]

Now, a couple of pre-filed comments question whether this new tax deal actually makes our existing "Save Our Homes" tax break MORE vulnerable to legal attack:

It has been brought to my attention, and verified by a representative of a major trade association in Tallahassee, that if approved by voters on January 29, the new Property Tax Reform constitutional amendment would make a legal constitutional challenge to the existing Save Our Homes system more valid and easier to get Save Our Homes thrown out completely. I believe this would be related to the new portability provision... Said another way, if this new amendment passes, it could put the entire Save Our Homes system in legal jeopardy. -- Mike Mayo

There maybe an unstated, intended consequence that adding portability to SOH will make it more vulnerable to Constitutional attack, thereby, allowing the Tax and Budget Reform Committee to write on a clean slate when they propose changes. Is it paradoxical that by voting for this
amendment in January, we may be taking steps to eliminate it? If that was the plan, then it's brilliant and I applaud what was done. If not, then the inequity of SOH just got worse. -- Brent Armstrong

[Ron]

Property appraiser, County Commissioners and now my State Senator. The list of those that must be voted out of office continues to grow.

[Howard Troxler]

Dear Mike and Brent: First of all, Save Our Home is ALREADY vulnerable and is under constitutional attack. In the end, how fair is it that Citizen X should be taxed differently from Citizen Y for property of comparable value? It is unfair for several reasons.

The original tax deal would have helped Save Our Homes a little by giving a tax break to ALL first-time home buyers in Florida. Since this deal that was actually passed does not, the original Save Our Homes weakness is not helped any.

As to whether the new deal, including portability language, makes the situation even worse, still lookin' into it... makes sense that it would, since portability only "enables" the existing unfairness to be perpetuated.

[Howard Troxler]

Here's a question from Nan about whether this new plan will be approved by the voters on Jan. 29:

Did you see the comments to the Alex Leary article? Two guys named Pete and Joe think homeowners are getting "screwed" again because they only get 3%, while businesses get 10%. LOL Now I see why that judge struck the super exemption from the ballot as too "confusing" to the FL voters.
If this bill makes it to the Jan.29 ballot, do you think it will fail to get 60% because of all the voters who think they are being "screwed." -- Nan

[Howard Troxler]

Dear Nan:

I can see the thing passing. After all, the concept of a "doubled" homestead exemption is simple and polls very well. Much simpler than the 40 pct of median value, etc. etc.

The Realtors should like the portability. The governor is saying he'll campaign for it big-time. I kinda figure the attitude of most voters will be, it's a bird in the hand, even if only a smallish one.

[Ron]

It should pass, although the Teachers Union has a lot of clout and a lot of money to campaign against it.

[Bland]

Howard,

Thanks for your answer. If you move into a more expensive property than $500,000 you are screwed. I do have that problem. I'm lucky and not moving. But I believe this is my point. Expensive properties are stagnet as well. Folks are finally figuring out how high these property taxes are and not moving, selling, or buying. I have lived in my waterfront home for 17 years. Under this law I can not move and buy a place in the Keys for example and pay the taxes. I hate to say if but a million dollars is not what it used to be. So after 54 years I can not leave Pinellas County.

[Howard Troxler]

Bland, I believe that $500,000 is the maximum size of the tax BREAK that can be portable... yep, that's what the amendment says. The house can be a bazillion dollars or a million, doesn't matter, the cap exists on the total exemption possible.

[Howard Troxler]

Here's a comment from Boo Boo:

I know all the talk today will be about the new and improved tax package. Lets blame this one or that one or this party and that party. But when it comes right down to it, is it not local government that got the windfall and spent it instead of being conservative. For 5 years they could have lowered the millage rate to collect what they needed to run but instead took the money added another penny to it and spent spent spent. -- Boo Boo

[Howard Troxler]

Dear Boo Boo:

Oh, you want to use MEMORY. Well, good for you. Of course you are right -- the basic problem was the run-up in property values that sent local revenues skyrocketing. They did NOT reduce tax rates to the full extent that would have offsetted the values.

For quite a few years, locals enjoyed this run-up, all the while claiming to have "cut taxes" or "held the line" simply by keeping their rates high.

There is not a local government around that would not tell you, however, that it used the money for Good Things.

[Larry]

Howard, this diversion to taxes has certainly taken the minds of the citizens off the insurance crisis that continues to boil just beneath the surface here in Florida. Also, we are finding out that it is not just Florida that is being hammered, it is all of the coastal states. Since we have had a relatively quiet year, once again bucking the "expert's" predictions, could you find out how much reserves Citizen's Property Insurance was able to squirrel away? Since the selling of cheap re-insurance through the state (taxpayer's on the hook) didn't work to lower rates, is the state still letting the greedy hogs buy our cheap re-insurance? For what? It didn't work so let's take the citizens of Florida off the hook to those money grubbers. When do you think our brilliant legislature and governor will have time to devote to the insurance problem?

[Howard Troxler]

Larry, you are keeping your eye on the ball!

I can look up Citizens' reserves, but let me remind you that the Legislature, as part of the insurance "fix" earlier this year, simply waved a magic wand and ordered Citizens NOT to go through with the rate hikes it said were necessary.

Most of Citizens' potential coverage does not involve a big pile of cash sitting in the bank, but the state's ability to borrow money against future assessments on private insurance policies...

[Howard Troxler]

Hey, for anybody who's just watching the chat -- we're halfway through the live portion of today' chat, and there's plenty of time left to chime in about this or other issues!

[Bruce Cotton]

Would like to get everyone's opinion of this tax plan I'm working on.

ALL Homes pay 1.5% of taxable value, homes over $1 million pay 1.75%

All Business pays 2%

Low income seniors ( $24K less/year) pay nothing

All 67 counties appraise property at end of year value ( not median of year).

[Bruce Cotton]

Almost forgot...

Cap yearly increases at 3% homes, 5% business

[Howard Troxler]

Just looked up Citizens' balance sheet.. total assets something like $10-billion, but that's not the same thing as reserve available purely for a storm...

[Howard Troxler]

Bruce, as with any plan (and believe me, I hear a zillion of 'em), the trick is to attach the various percentages to specific revenue, show whether it meets the needs of the state.

Can't tell you how many such plans I hear and when I ask what to do if it doesn't raise enough $$$, the answer is, "Just cut waste."

Also, I like the simple fairness of your plan BUT guarantee you that if we ever actually tried to implement, somebody immediately would say, "Well, here's why WE should have to pay less than somebody else."

[Howard Troxler]

Now, may we briefly change the subject for a question from Jennifer W?

I have a question about the city council election and the notice about how much money it will cost if we vote for "new election" instead of

Jamie Bennett.

Why is it a bad thing to let the voters know the $248,000 or so price tag? The headline article today (Tuesday) is really bashing the ethics of whether or not to let the voters know ahead of time. If it is a matter of when and how they notify us, fine, I get it. But in general I read in the rhetoric that it is a "bad thing" to inform us. That I don't get.

[Larry]

Thanks for your reply. I take it then that the rates being charged by Citizens are not actuarily sound. If that is the case, the how high would rates have to be? Keep in mind that most of us are paying about 500% more for insurance than we did just five years ago. In this instance, can you make rates actuarily sound and still retain your citizenry or will be all be moving to Tennessee? If rates are not actuarily sound, then what is the fix going to be for insurance? Noting that our esteemed legislature is not the sharpest knife in the drawer, what can we expect from them? They cannot keep waiving their magic wand forever.

[Howard Troxler]

Hi Jennifer, and nice to hear from you!

I definitely am one of those who object to the "when and how" part -- the city wants to hand out a letter INSIDE THE VOTING PLACE to "inform" citizens on the costs if they vote a certain way.

In general, I also have been skeptical of government efforts to use tax dollars to "educate" voters on WHICH WAY TO VOTE, as both city and county governments did in the fight over County Charter amendments last year.

[Howard Troxler]

Re: taxes: I see that Speaker Rubio has scheduled a 1:45 conference call with reporters. It'll be interesting to see whether it's just more post-mortem of the session, or a plan for the future... remember that Rubio has advocated deeper tax cuts, although I still don't like focusing on homeowners only.

[Bruce Cotton]

Agree completely Howrad.

I'm working on getting the numbers in place for it, but from a related article I read about a similiar plan ( based on 1% of taxable) it would generate 24 billion of the 30 billion collected last year. With the precentages moved upward slightly it should cover the addditional money.

I think the beauty of it is that everyone would pay fair value for their home, unlike the SOH v non SOH situation we have now.

[Larry]

Bruce, your tax plan looks good on paper, but don't forget who makes the laws. Mostly the lawyers. It's too simple and straightforward. Not enough business in their for them.

[Howard Troxler]

Or, Bruce, 1% property and then offseting some by taking out some of the tax loopholes in the sales tax? Wouldn't even have to raise the sales tax RATE.

But, as I say, everybody thinks THEY deserve a tax break. Your plan requires getting voters to give up Save Our Homes, seniors to give up their stuff, etc. -- on the other hand, a plan compellingly simple enough might get 'em to switch.

[Howard Troxler]

Whoops, Bruce, I correct myself -- you keep a 3 pct tax cap for residential and 5 pct for non.

[Howard Troxler]

Larry, cynical but correct, I would say.

Taxes are fair only as long as they are designed to raise revenue for the public good.

The instant that tax policy is altered for some social engineering goal -- e.g. to favor homeowners, seniors, business incentives, whatever -- we leave the realm of revenue generation and declare open season for lobbyists.

[Howard Troxler]

There are 10 minutes or so left in the ilve portion of today's chat... in case somebody would like to bring up a different topic! I am afraid we have taxes on the brain...

That what the selling point would be, that by giving up your cap you would actually pay less tax AND would still retain a cap on increases.

Larry,
I think the lawyers would be outnumbered by the groups that whose members would benefit...FL Chamber, retail Fed, even the teachers union or the local governments who wouldn't be hurt by it.

[Howard Troxler]

(Sudden silence) Not that I was saying we had to quit talking about it! :)

LOL... it is the topic de jure. Probably one of the most important issues we face in Florida right now...unfortunately

[Howard Troxler]

I am curious now about whether this new plan makes Save Our Homes more vulnerable to legal challenge.

Equal protection, commerce clause, right to travel...

[Bruce Cotton]

My plan or the band iad the Legislature just passed??

[Howard Troxler]

No, the Legislature's plan. After all, that's the one that's proposed to become part of our state Constitution in the Jan. 29 election...

Well, it's a little past 1 p.m. (although my confused computer says 12:03!) ... and the live portion of today's chat is over.

THANK YOU to everybody who took part or who just stopped by to take a look. Feel free to add more thoughts & comments... and I hope to see you at future chats here on TroxBlog!

[James]

Bruce's idea is DOA. Why? Tell Grandma who has been living in her waterfront home for 40 years that her taxes are going from $3,000/yr to $15,000. Grandma will be trotted out in front of the cameras, weeping, as she tells her tale of woe and pounds a "For Sale" sign into the yard.

But Grandma can't sell her house! Everyone is trying to get out! Grandma's house then gets reassessed at the end of the year and her annual tax bill goes from $15,000 to $18,000! Oh the humanity!

I do like your idea of free taxes for seniors - I will be putting my retired mother's name on the title of my next $1M house.

[Larry]

Howard, I know you were overwhelmed by the tax chat today, but getting back to the insurance thing. My own homeowners insurance has gone from $500 per year and $250 deducible, seven years ago, to $3,600 per year (Citizen's)and $13,750 windstorm deductible. This is coverage on a concrete block dwelling, built in 1969 and insured for $275,000. You're telling me that Citizens did not raise rates this year to what they should be at because the legislature (God love them) waived a magic wand. If $3,600 per year with a $14K windstorm deductible is not actuarily sound, what would my insurance have to be assessed at to make it actuarily sound. Perhaps I can't afford to live in the once beautiful state where I've lived my entire 63 years. Could you check with your insurance Guru's and see what a really for real actuarily sound premium for my home should be?

[Larry]

And, by the way, the tax plan passed by the house because it was jammed down their throats, does not offer the relief needed by the largest sectors. Once again these do-nothings will probably keep their jobs because the voters are homestead property owners. Businesses and out of state homeowners do not vote. Doubling the HE is a misnomer. It is not doubled due to the school's exemption. I don't have an argument with that, but let's call it what it is. About $240 for average homeowner who is already covered by SAH and has a 3% CAP. Portability, yes good idea, but I fear that the baby will be thrown out with the bath water, once the challenge to SOH get's to the courts. I beleive the Senate showed it's true colors through this episode. In the final analysis, they did as little as possible and maintained some credibility. It will remain to be seen how the voters deal with them. Voters do seem to have very short memories.

[Bruce Cotton]

James, It's a shame you are willing to put your mother in jail for tax evasion.

When Mom's income is verified at under $24K it's going to be tough to justify her suddenly owning a million dollar home, especially if you have her finance it too. Wonder how the bank is going to justify granting her a home loan when her income is under $24K.

Gee James, you are such a good son. Bet the IRS would love to see you coming.

You really think the state wouls allow a tax exemption like this without verification of income and be wary of sudden ownership of homes well above their income level?

As for Granny's home on the waterfront, if she is low income she pays no taxes so she isn't going anywhere until she wants to. In order for her taxes to go up from 3- 15,000 under my plan her home would have to have a taxable value close to 1 million dollars
(at a taxable value of $1 million the tax would be $20,000), which would put the market value at well over 2 million dollars. With property that valuable Granny sold out long ago and bought a luxury condo down on the beach and she isn't hurting for cash at all.

If Granny earns over $24K and her home ishas a market value of $200,000 her assesed value is around 137,5000. She still gets a $25,000 homestead exemption anf if her county/city allowed it another $25,000 senior exemption ( possible even more if he she or her spouse were veterans). This puts her taxable value at $87,400. Under my plan her tax would be $1311. Which is well below what she is paying now under SOH.

[Elaine]

We keep reading about "portability", but nowhere have we seen it explained. Does it mean we can buy a more expensive home, with higher property taxes, and move our current, "lower" taxes to the new residence???? Say we are currently paying $1500 in taxes and a new place has a $7,000 property tax bill. Do we only pay $1500??? We don't get it.

[David McKalip]

Cap property taxes at 1.25% of TAXABLE VALUE (not just value...this will save granny). This is the point of our citizen petition drive at www.CutPropertyTaxesNow.com.

This will cut local budgets 25-40%, apply to homerowners and non-homesteaders, protect SOH and allow Tallahassee to increase sales taxes if needed to get more revenue to the locals.

Join the cause.

[James]

Bruce, your idea is still laughable. I mistakingly read "taxable value" as "market value" in your proposal.

However, in terms of tax revenues, your plan will be collecting much less than what they are collecting now. From 2.5% (what I was paying on one of my properties in Pinellas) to 1.5% for homeowners and all the way to 0% for Grandma? What about the tax money that goes to children, police, etc? I hate taxes, but a cut that severe cannot be defended.

Plus, the savings from "no taxes for seniors" will be high enough for people to put together legal plans to avoid taxation. This is not rocket science.

[Bruce Cotton]

James,

That's more of the input I was looking for rather than your first post. I need to hear all the legitimate shortfalls to know what to put into a final version that is simple and helps the most people and controls local government spending without hurting them or schools.

According to the info that I based my plan on, collecting at 1% for ALL homeowners and business would collect $24 billion out of the $30 billion right off the bat. Upping that to 1.5 for homesteaders and 2% for non homesteaders, high value homes and business should make up the $6 billion and handle the senior element.

The senior element can be structured to make sure that the income level is a true indication of gross income, not someone making well beyond $24,000/year and trying to hide it. Another possibility is to just give those low income seniors a lower rate of 1% down to .5% of taxable value.

[Howard Troxler]

Dear Elaine:

What you take with you when you move to a different house is the size of your Save Our Homes tax BREAK.

Let's say the "real" value of your old house is $400,000 but your Save Our Homes taxable value is capped at $300,000.

You're getting a $100,000 tax break in the old house -- and that's the size of the tax break you move to your new house.

If's it's larger, say you're moving to a $600,000 house, you still get a $100,000 tax break -- dollar for dollar, you haven't lost any dollars.

You WILL be paying more taxes -- because, after all, you've moved into a bigger house and you ought to. But you haven't lost any of the tax BREAK that you had in the old house.

Now, what happens if you move into a smaller house? You keep the same PROPORTION of your house's value as a tax break. In my example, you were only paying taxes on $300,000 of your $400,000 house -- 75 pct. So if you moved into a smaller house, you'd only be paying taxes on 75 pct of its value as well.

[ed]

the politicians have done it again-this whole mess started when the tax money was pouring into the government coffers about 2001-so there was to be a rollback-we got a 'TINY ONE", TO 2005??,HOWARD?? THE ROLLBACK TO 2001 WOULD HAVE REALLY BEEN TAX RELIEF-BUT THE POLITICIANS CONFUSED US WITH ALL THE NUMBERS-WHO SAYS THEY DON'T WORK TOGETHER!!!!

[Bob Heltsley]

Dear Howard, A lot of people don't know that if a home is assesed at less then $75,000 they do not get any additional homestead. But the people already paying low taxes by having save our homes do get the additional homestead tax break. I see people that will miss the additional homestead by a little over $100. Thier home was,assesed at $74,851.00.