Sunday, March 23, 2008

Transcription of an interesting article from the Sun Sentinel

Beware the fine print on latest property tax proposal

The Sun Sentinel - By: Michael Mayo - March 23, 2008

By now, you've probably heard about the proposed constitutional amendment to swap state-mandated school property tax with a penny sales tax increase and a repeal of certain sales-tax exemptions.

Sounds palatable, especially for those who bought houses in recent years and whose property tax bills could drop about 25 percent.

But before you go rushing off to vote for the plan, hatched and approved at lightning speed last week by the Taxation and Budget Reform Commission, consider the parts you probably haven't heard about:

- School districts would still be able to collect property taxes for construction, renovations, repair, debt repayment and other expenses. Local schools could still collect up to $5 for every $1,000 in taxable value.

- Part of our tax savings would end up going to the federal government. Property tax is deductible on federal income returns, but the deduction for state sales tax has expired. Lower property taxes would mean a smaller deduction and a higher income tax bill for those who itemize.

- The proposed amendment would put a 5 percent cap on the annual assessment increase for non-homesteaded properties. That would be good news for businesses, landlords and snowbirds. But the new cap, which comes close to the 3 percent Save Our Homes cap for homesteaded properties, could mean higher property taxes for everyone.

Here's how a March 11 commission staff analysis of the plan put it: "The cap on the annual growth of assessments of non-homestead properties may reduce local government revenues and/or lead to an increase in millage (property tax) rates on all properties."

That doesn't sound good.

Neither does this, also from the staff analysis: ' This measure will shift funding for a substantial portion of the public education system to state revenue sources. This measure will likely reduce state government spending on services and items other than education due to possible budget reductions.'

In other words, this proposal might be another shell game.

It would need 60 percent voter approval in November to pass. As with the January property tax amendment, which increased the homestead exemption and allowed full-time residents to transfer tax breaks when they move, local governments can subvert the intent by raising tax rates.

This plan guarantees an annual $9.3 billion to local school districts, same as under the current system. But there's fuzzy math as to whether a sales tax increase and revamped exemptions would be enough to reach the figure. If there's resistance to a services tax (on things such as lawyers and barbers), there could be a big shortfall.

That would mean cuts to other parts of the state budget, which could mean local governments would pick up the slack by increasing their portion of property tax bills.
Here's a real-life example of how a tax bill (mine) might look if this amendment passes. My 2007 property tax bill was $2,936. The state-mandated school portion was $657.

The new plan would drop my bill to $2,279, including $387 in school district taxes that would remain. But the district could conceivably raise that to $680. And my property tax savings could be negated by increases in sales tax and income tax.

House Speaker Marco Rubio likes the plan, because it spreads the tax burden away from property owners.

"Up to 20 percent of sales tax revenue comes from tourists," he told me Friday.

But this year's state budget shortfall shows the volatile and unpredictable nature of sales tax revenue, which is overly susceptible to downturns in the economy and tourism.

Rubio said that in down years, government would have to spend less. Florida already ranks near the bottom of per-student spending nationally.

The sales-tax exemption revamp is a long overdue idea, but given the sketchy guidelines and power of lobbyists you wonder if the Legislature has the will to carry it through.

Michael Mayo can be reached at mmayo@sun-sentinel.com

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On the same note, my comments:


Of all the valuable information that has been above transcribed, my conclusion, is one more time, that you don't get richer or accomplish any savings by swapping money from one pocket to another.

The new tax reform proposed by the Taxation and Budget Reform Commission is one more attempt to do exactly that. At the end of the day, as it has usually been the sad reality, the burden of the charges will fall on the back of the people who can afford it the least.

We cannot reduce our schools budget. We should not reduce our existing social programs to assist low income, seniors, handicapped and sick citizens.

Our local governments have provoked the malaise of our property tax inflation. They are the only ones who can solve it. They have to trim their budgets to the point where we, the inhabitants of these cities and counties, can afford to pay for these budgets.

If we cannot afford to have magnificent city halls crowded with myriads of bureaucrats, and non-essential services, let's get rid of them. If we have too many overlapping services, police departments, water departments, cities zoning departments, firefighter services, let's consolidate them, merge them, or any other solution that makes them more efficient.

No city and no county should have the privilege of increasing their budgets more than the official rate of inflation, unless expressly authorized by the majority of voters.

That's the bottom line. And these are the principles that we have been taught to apply in our household budgets. You can't spend more than what you earn, because sooner or later you will be in trouble.

Reducing the assessments value of our homes can be easily circumvented by our local governments, increasing their millage rates. Reducing property taxes by increasing sales taxes could possibly overburden those who can least afford it – those who can't afford to buy a home.

Keeping things the way they are will continue the trend that is hurting Florida's economy. Discourage out-of-town buyers and investors, accelerating the present trend of our working population to migrate to other states, lower our middle-class living standards.

Why not deal with the reality and do what has to be done? Our local governments have experienced an unusual bonanza by multiplying construction and developments. Those hundreds of new towers and high rises has widened their tax base and should suffice to meet all their needs. Why insist on taxing us on inflated and unrealistic property values? A real rollback to a sound economy is the only answer.


Henry B. Nathan is a Florida Realtor at United Realty Group Inc.
Visit my website: http://www.condo-southflorida.com
where you can search for Aventura Condos, Florida Condos, Sunny Isles Condos.


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