Amidst Property Tax Debate, Legalized Gambling Inches Forward

For most of the past decade, advocates of legalized gambling have found a staunch opponent in Florida in Governor Jeb Bush. But with Bush out of office, new Governor Charlie Crist isn't taking quite as hard a line-- and the floodgates are slowly opening. As the Tampa Tribune documents, legislation passed in this year's session allows "more slot machines, bigger poker pots and longer hours of operation."

One of the principal architects of gambling's expansion in Florida is Rep. Jack Seiler, a Democrat from Wilton Manors, who successfully sponsored a bill to increase the number of slot machines allowed at parimutuel facilities from 1,500 to 2,000. Seiler's reasoning: it's gonna happen anyway, we might as well take advantage of it:

"Gambling is here in Florida," Seiler said. "It is not going away. And if it's going to be here, we might as well get some of the benefits."

This argument holds true up to a point: humans have always gambled, and probably always will, so the question is whether this baseline level of gambling will happen in an unregulated environment or a regulated one. But when gambling is expanded as a response to a fiscal crunch, the rationale subtly changes. Whether they realize it or not, Seiler and other gambling proponents are now counting on gamblers to help fund schools-- and have every reason to encourage them to keep on gambling. Tom Talley of the Florida Council on Problem Gambling says it better than I ever could:

"Once they get in these places, they just keep digging the needle in deeper...They increase the games, they increase the amount of betting."

Hoisted By Their Own Petard

In today's St. Petersburg Times, Steve Bousquet notes that Florida lawmakers seeking to push through big property tax cuts have made things harder for themselves with their recent (successful) effort to raise the hurdles for constitutional amendments.

Until the passage of a 2006 constitutional amendment by voters, it only took a simple majority of voters to change the constitution. A lot of people thought this was too easy, so the amendment vote was set up. And 57 percent of Florida voters thought it was a good idea.

Of course, the result of that vote is that if Florida lawmakers pass a bill expanding the $25,000 homestead exemption (which would have to be ratified by Florida voters), 57 percent of Florida voters would no longer be enough to ratify it.

Is this a good thing? Maybe. If you think of a constitution as being a form of "higher law," different from the everyday statutes lawmakers pass every day, then it makes some sense to have a higher standard for changing these higher laws. For anything important enough to be written into the state's constitution, this way of thinking goes, you better be able to get more than a bare majority of people to support it.

Of course, the flaw in this argument is that when the constitution gets used for things that are fairly mundane, like the level of the state's homestead exemption or (as Louisiana does) the income tax brackets, then your constitution is no longer composed entirely of things that can be described as "higher law." It's more like a shopping list than a bible.

But if a state constitution is a mix of fundamental rights and bookkeeping measures, you've either got to be too free and easy with the fundamental rights (as Florida legally was before 2006) or a bit harsh on the bookkeeping stuff (as Florida arguably is now). So, what Florida does now is not more obviously wrong than what they did two years ago.

The real answer, for what it's worth: get the basic stuff out of the constitution. Make your state's constitution truly "higher law" in the sense that it contains the really fundamentally important things and excludes the knick-knacks.

"Save Our Homes" and Seniors

In the otherwise controversial world of property tax reform, pretty much anybody can agree on one position: seniors should not be taxed on their homes. But as Martha Brannigan documents in the Miami Herald, a case can be made that Florida's "Save Our Homes" property tax cap is having just that effect. Here's Brannigan's lede:

After Kimrey Newlin retired two years ago, he and his wife moved closer to their grandkids, leaving the $1.2 million Key Biscayne house they had lived in for 27 years for a $545,000 home in the Falls... But the Newlins are paying for the move. Although the new place costs less than half the old one, their property taxes jumped to $9,000 from $6,400.

The reason for this seemingly illogical jump: the biggest single property tax relief measure used in Florida, the "Save Our Homes" cap on the growth of taxable property value, depends primarily on how long you've lived in your house. The people who get the most out of Save Our Homes are those who have lived in the same home for the longest amount of time. And the people who get the least are those who have most recently bought their homes.

When a tax break is so obviously based on a senseless principle, it will inevitably run afoul of more basic tax principles such as "stop taxing seniors out of their homes."

As Brannigan notes, Florida does offer targeted tax relief for senior homeowners-- the extra $25,000 homestead exemption for low-income seniors is a welcome, and well-targeted, break-- but it's clearly not enough for elderly homeowners like the Newlins.

As we've noted before, there's a better alternative: a property tax circuit breaker credit, which would allow Florida policymakers to identify exactly which senior homeowners (and, if they wished to, renters) should be receiving property tax cuts, and then impose strict limits on how high property taxes can go for these fixed-income seniors.

But don't hold your breath waiting for such a reform to emerge from the special session starting tomorrow...

More on the Inequities of "Save our Homes"

Most observers of Florida tax politics don't need any more anecdotal evidence to understand just how silly and unfair the "Save Our Homes" property tax break has become in the 10-plus years of its existence. But what the heck-- here's one more from the Miami Herald:

Ivette Rivas was thrilled when her 19-year-old daughter, Amber Díaz, who suffers from mild autism, received a scholarship from Florida International University, but first Rivas was in for an education on property taxes.
It came after the Rivas family moved from their large house in The Hammocks to a smaller one closer to the university .... Rivas sold her four-bedroom, 2,500-square-foot home and bought a three-bedroom, 1,900-square-foot home for the same amount: $400,000 .... By changing homes, the Rivas family lost the protection of Florida's Save Our Homes Amendment, which caps property-tax increases year-to-year. Her annual tax bill more than doubled, from $3,500 to $8,600.

This crazy result doesn't have to be entirely attributable to "Save Our Homes," of course-- different taxing districts have different property tax rates, which could explain some of the difference-- but this change must be primarily due to the tax cap, which limits annual growth in a home's taxable value to 3% until you move.

The lesson: repealing "Save Our Homes" has to be a first step in any effort to truly reform Florida property taxes. At the end of the day, the baseline against which property tax liability ought to be measured is what your home is actually worth-- and Save Our Homes makes this impossible in a way that is patently unfair.

More Florida Seniors Get $75,000 Property Tax Break

News continues to trickle in about Florida localities who are taking advantage of the opportunity, newly granted to them by a constitutional amendment approved by Florida voters last fall, of adding an extra $25,000 "homestead exemption" from property taxes for all over-65 homeowners. The town of Miami Lakes has approved the exemption, which means that if you're over 65 and live in Miami Lakes, the first $75,000 of your home's value is now exempt from tax.

(The math on this: there's a statewide $25,000 exemption; for almost 10 years, locals have been allowed to do an extra $25,000 exemption for low-income seniors only; and now, participating locals can add a third increment of $25,000 to the exemption total, again for low-income seniors only.)

RE the question of whether this policy change is a smart thing, Laura Figueroa's Miami Herald article on this change lets local officials do the talking:

''Our senior citizens living on fixed incomes are our most vulnerable group,'' Mayor Wayne Slaton wrote in a memo to Town Manager Alex Rey. "Providing them extra tax relief should continue to be our goal.''... More than 400 households are eligible for the exemption, said Rey, who estimated the town would lose about $24,000 in tax revenue as a result of the increased exemption. ''It's a minimum financial impact, but the benefit to the individual households was largely needed,'' Rey said.

Without belaboring the point, there's a good policy question here: if your concern is "senior citizens living on fixed incomes," why are you enacting a tax break that provides not a dime to low-income senior renters?

The short and not very interesting answer is that this is the option available to Florida local governments right now. But then what folks ought to be talking about is why better-targeted reform options, like a low-income property tax "circuit breaker" credit, aren't being made available to locals.

Rubio: No "Use Value" for Florida Businesses This Year

The St.Petersburg Times reports today that Florida House Speaker Marco Rubio thinks a preliminary plan to offer special assessment rules to certain Florida businesses is not going anywhere in this year's special session.

The idea, which Rubio apparently supports, is that at least some businesses ("modest businesses" and "mom and pop hotels" are mentioned in the article) should be assessed, for property tax purposes, not based on their market value but based on their current use.

This isn't an unprecedented idea. Pretty much every state does it for farms, assessing agricultural property based on its value for farming purposes rather than its (usually greater) value as a site for new condos. But the practice has attracted widespread criticism in Florida and around the nation for benefiting folks who clearly aren't farmers and clearly aren't financially needy-- and I can't think of any state that also grants this tax break to non-agricultural businesses.

If this practice can be abused by would-be farmers, at least there's a good intuitive reason for offering it to them: if every farmer in developing areas was forced to sell their property due to high property taxes, you'd get a much faster pace of development in formerly green areas. (Of course, the question of whether a general tax break for ag property is the best way of restraining development is an open one.)

But it's much harder to make the case for similar tax breaks for businesses, especially in an already-urban environment. How important is it to keep, say, a used-car dealer in the same place after a neighboring suddenly becomes a high-rent area?

And this "reform" idea ignores the larger question of why businesses are paying more property taxes to begin with-- which, of course, is because the state is granting unaffordable and poorly targeted tax breaks to homeowners while giving virtually nothing to businesses. If this summer's special session on property taxes results in major cutbacks in property taxes for everyone, the need for applying "use value" to businesses-- or enacting some better-thought-out form of business property tax cuts-- could diminish overnight.

Lawmakers Reach Tentative Agreement on Property Tax Cuts

Legislative leaders in Florida's House and Senate have agreed on a very broad outline for a property tax cut agreement. As described in the Orlando Sentinel, the plan has two parts:
1) Forcing local governments to cut property taxes this year, and limiting property tax growth in future years to the growth rate of personal income.
2) Replacing the much-maligned "Save Our Homes" tax break with a "super-sized" homestead exemption based on a sliding-scale percentage of home values.

On one level, it's hard to call this much of a victory for lawmakers, because it leaves unresolved the thorny question that derailed the regular legislative session: how much the tax cut will cost."This doesn't resolve what is by far the biggest disagreement: How much are we reducing taxes?" said Senate Democratic Leader Steve Geller of Cooper City. "Without knowing the size of the tax cut, you can't write a tax-cut bill."Similarly, until the exact description of the "super-sized" homestead exemption is known, we can't say anything about the fairness of this tax break.

But there are a couple of things we can say immediately:

1) Beware of any plan that imposes strict limits on the growth of local government spending without providing a reliable source of state aid to local governments. Locals haven't been increasing spending because they're interesting in mimicking drunk sailors-- they're doing it because the state has been gradually and systematically starving them of state aid. The Center on Budget and Policy Priorities has this analysis of the dangers of spending caps for Florida.

2) A homestead exemption is a major improvement for tax fairness over the mess that is known as "Save Our Homes." It would be hard to design a homeowner tax break more capricious or obviously unfair than Save Our Homes, and virtually any homestead exemption the legislature dreams up will be a major step forward for tax fairness.

3) Renters won't like this plan. The centerpiece of the reform is a tax break that goes only to owner-occupied homes.

More details will, doubtless, emerge in coming days. Stay tuned...

A Tax Cut-- Or a Tax Shift?

Question: What happens when you enact unaffordable tax cuts?
Answer: Some other tax (or fee) goes up to replace some, or all, of the lost revenue.

As the Marco Island Sun-Times documents, this process is already underway in some Florida localities, even though the state legislature has not yet voted to approve property tax cuts:

With a proposed property tax reform plan from state legislators likely to reduce spending at the local level, city officials are preparing ways to generate additional revenue. One of those options could be a public service tax on electricity, liquefied petroleum gas, manufactured gas and metered natural gas, City Manager Bill Moss said in a May 29 city council memo.

This shouldn't surprise us. There are very real indicators that locals simply can't afford to just drop their spending by the amount of lost property taxes.

This isn't news-- but it should serve as a reminder that there's no free lunch in Florida tax reform. If cuts will be enacted, cuts will ultimately have to be paid for.