Save Our Homes a good or bad thing?
It depends on who’s answering
Back in
1992, escalating property values and their impact on real estate
taxes led to a citizens’ petition that resulted in the Save Our
Homes amendment to the Florida Constitution that was approved
overwhelmingly by Florida voters that year. The law took effect in
1994. Save Our Homes caps the annual increase in property values for
property tax purposes on homes that are principal residences to
three percent or the annual inflation index, whichever is less.
While
Save Our Homes at the time of its passage was hailed as a good thing
for homeowners, the love is gone among many homeowners seeking to
move to another home and for businesses that face an added property
tax burden as a result of a tax burden shift caused by Save Our
Homes.
Today,
there is debate across Florida as to whether Save Our Homes is a
good or bad thing. The answer very much depends on a person’s
perspective.
“The
Save Our Homes program has been a mixed bag,” said Volusia County
Property Appraiser Morgan Gilreath. ”Tax exemptions without spending
limitations seem to be governed by Newton’s Third Law -- for every
action, there is an equal and opposite reaction. In other words, for
every tax dollar saved by homeowners under the Save Our Homes
program, equal tax dollars are added to property owners who don’t
qualify.”
In 1995,
the Save Our Homes program affected 128,351 parcels in Volusia
County, reducing taxable values by $6.2 billion, which equates to
$142.1 million in taxes that qualifying homeowners did not have to
pay. However, that $142.1 million in tax liability was shifted from
Save Our Homes-eligible property owners to others who weren’t. This
combination of $142.1 million in increased taxes for those entities
picking up the slack -- primarily businesses – and increases in
spending levels among various taxing authorities has created a
difficult situation for businesses, renters, second home owners,
etc.
Save Our
Homes does translate into homeowner savings on their property taxes,
especially during times like these when most residential property
values in Volusia County are appreciating much greater than 3
percent a year. However, should a homeowner wish to move up or
downsize, it’s very likely a significantly higher property tax bill
awaits when they buy their next home. Additionally, the home being
sold, which had been under the SOH program, will be re-assessed at
its actual tax value, resulting in higher real estate taxes for the
next owner. This has resulted in many complaints among homeowners
who feel trapped in their homes and, despite rapid appreciation and
greater home equity, cannot or will not endure the higher tax burden
that would come with a move. Meanwhile, homeowners and businesses
not eligible for SOH are shouldering a bigger part of the tax
burden.
“These
issues are real and complex,” said Bob McKee, Fiscal Policy Director
for the Florida Association of Counties. “As we approach ways to
solve the inequities in the program, we need to be very careful
about the solutions we pursue.”
The
Florida Association of Counties supports narrowly targeted
portability of Save Our Homes exemptions for those older than 62 or
totally and permanently disabled – on a one-time basis when
downsizing within the same county. This was a recommendation coming
out of the FAC Property Tax Workshop, composed of county
commissioners from across the state.
Another
approach to the complex problem is to extend the SOH cap on
homesteaded properties to seasonal homes, rental property and other
commercial property. This would give these property owners the
protection of a valuation cap, although property tax rates are not
-- and would not -- be governed by the cap. With residential
property taxes accounting for a significant percentage of local
government revenues across Florida, tinkering with the SOH formula
has the potential to affect the tax burden significantly and the
ability of local governments to provide services.
It’s a
thorny issue and it will take a great deal of thought to effect
change that is good for all concerned. Bills have been introduced in
the Florida Legislature which, if approved, could affect real estate
taxes by doubling the homestead exemption from $25,000 to $50,000,
enacting a “cap gap” on the difference between tax valuation and
actual value and other methods of taxation. But these measures have
significant consequences for homeowners and businesses not eligible
for these breaks.
Florida’s constitutionally created Taxation & Budget Reform
Commission will meet in 2007 to address problems in the state’s tax
structure. The goal is to study all issues thoroughly to ascertain
the full impacts to the equity, fairness and revenue-raising ability
of the property tax.
