Super-sized savings? Property tax cut may not mean big bucks for everyone
June 17, 2007
Don't expect to buy a new high-definition television or take an Alaskan cruise on the property tax cut that the Legislature ordered for this fall. Think more along the lines of a new MP3 player or day passes to SeaWorld for the family.
And don't hold your breath for more savings later from the super-sized homestead exemption that legislators also fashioned.
That proposal faces an uncertain fate in a statewide referendum next January. And if it is approved, many South Florida homeowners won't benefit.
The often feuding property appraisers of Broward and Palm Beach counties even share that analysis.
"This isn't real relief," said Broward County Property Appraiser Lori Parrish. "People were given the impression they will save lots of money, and they're going to find out that this is much ado about nothing."
Palm Beach County Property Appraiser Gary Nikolits advises people to be cautious about switching to the super-sized exemption if it's approved. He notes that he'd receive an upfront saving on his own $288,000 West Palm Beach house but would pay more over time.
"Taxes will rise much faster under the super-exemption than they would under Save Our Homes," he said. "I'll probably stick with what I've got."
The super-exemption is the second part of a two-phase tax relief package that legislators approved in their special session last week and it's the most confusing in terms of who would benefit. Local governments must roll back taxes this fall in the first phase of the plan.
The largest potential for savings is through the super-exemption, which voters will consider in January as an amendment to the state constitution. While average homeowners in the state would save $174 under this fall's tax rollback, the super-exemption would bring an average savings of $1,306, according to a legislative analysis.
The super-exemption would replace the current homestead exemption as well as the tax break called Save Our Homes. Current homeowners would choose which set of breaks to use, but could never switch back. New buyers have no choice but would automatically receive the super-exemption.
Under today's system, $25,000 of a home's value is exempt from taxation and its taxable value cannot increase more than 3 percent a year.
Under the super-sized exemption, 75 percent of the first $200,000 of a home's value would be tax exempt. Fifteen percent of a home's additional value up to $500,000 would be exempt as well. There would be no cap in how much a home's value can increase, so the home's value immediately begins to increase with the market.
Many area homeowners would be better off under the current Save Our Homes system because property values in South Florida are high and generally increase fast, the property appraisers say.
A longtime homeowner whose home has grown dramatically in value would likely want to stay with Save Our Homes because so much of the property is exempt from taxation; that's particularly true for owners of high-end properties. Even for longtime owners of more moderately priced homes, the savings from the super-sized exemption could dissipate after several years.
An analysis for the Legislature estimated half of Broward and Palm Beach county homeowners would be better off staying with Save Our Homes next year if the constitutional amendment is approved.
Snowbirds, landlords, owners of investment property and businesses would not benefit at all.
That has Gerry Brissenden, president of the Canadian Snowbird Association, upset and saying state officials failed to give meaningful relief to all property owners. He predicts more and more part-time residents will choose destinations other than Florida because of high taxes.
"We have people who are paying $4,000 to $5,000 more in taxes than they were a couple years ago, and that can't keep going on," he said.
So who would benefit from the super-exemption?
People buying new homes would save more initially than they would under Save Our Homes. How long that savings would last would depend on a home's initial value and the growth in the real estate market.
For example, according to an analysis by the Broward Property Appraiser's Office based on modest increases in property values, the owner of a $150,000 home would pay less in taxes with the super-sized exemption for 17 years than with Save Our Homes, but then would pay more. The owner of $350,000 home would reach that tipping point after 11 years, and the owner of a $750,000 home would reach it after seven years.
Voter approval of the super-exemption would trigger another round of cuts for local government. Schools stand to lose in the second phase even though legislators promise to try to make up their losses.
Broward, its cities, special districts and school system would have to cut spending $712 million. In Palm Beach, $585 million would need to be cut.
Political observers are divided over how the constitutional amendment will fare.
Some think residents will yearn for additional relief, particularly when they have the option of choosing which set of tax breaks is best for their current home.
However, changing the constitution now requires the approval of 60 percent of voters, a high bar that was not reached when the initial Save Our Homes break was established in 1992. Police officers, firefighters and teachers likely will rally against the amendment because of the spending cuts required.
"This will be the single biggest setback for public safety in the history of Florida," said Russ Chard, president of the Hollywood Professional Fire Fighters. "The public needs to be aware of that because Tallahassee is promising they won't lose services and that simply is not true."
If the amendment fails, property owners would still benefit from the government spending cuts ordered for this fall. In addition to the $174 average savings that homeowners should receive, business owners would save an average of $941 on their tax bills.
Critics of the state property tax system wanted a larger savings guaranteed up front. They fear the constitutional amendment might not pass and wouldn't have an effect until late 2008 anyway.
"This is pathetic," said Joe Roberto, president of Fort Lauderdale's Roberto & Associates title agency and a tax reform activist. "People needed something more drastic."
| http://www.floridahomesteadservices.com |
