Monday, November 05, 2007

Violating the "Right to Travel?"

It's never easy to design an effective ballot proposal on tax issues. You've got to explain inherently complicated tax concepts in simple, easy-to-understand language, and you've got to do it in a way that doesn't misrepresent the proposal's actual impact.

In their effort to achieve these goals, the legislative architects of Florida's January 2008 ballot measure on property tax cuts may have forgotten a third important goal: don't violate the US Constitution.

As the Palm Beach Post describes it, the hallowed (since 1999, anyway) principle at issue here is "the right to travel:"
The "right to travel," established by a 1999 Supreme Court decision, gives Americans the right to move from one state to another without being treated less favorably than those who established a home earlier.
The January ballot measure falls afoul of this provision by treating current Florida homeowners much better than, say, someone who currently owns a home in Alabama. Under the legislature's latest plan, a Florida homeowner who is currently getting, say, a $50,000 reduction in his home's value from the "Save our Homes" assessed value cap would be allowed to transfer this tax break to a new (Florida) house when he moves. Someone moving from Alabama would get nothing, and would pay much higher property taxes on the very same home than would the Floridian.

Even if it wasn't unconstitutional, this would be patently unfair. It's hard to defend a tax break that's based not on your ability to pay but on your bona fides as a long-term resident. But now Florida lawmakers have to worry about whether their latest property tax bill violates the highest law in the land.

The fundamental miscalculation lawmakers are making here is that, faced with an unfair tax break that gives too much to some and not enough to others, they've decided the only way to fix it is to give more to everyone. If the US constitutional problem turns out to be legit, "everyone" just expanded to include folks who don't currently live in Florida.

When you're in a hole, the old saying goes, stop digging. Florida lawmakers are in a tax policy hole of their own making, and appear to think they can dig their way out. But a more sensible first step would be to repeal "Save our Homes" and enact property tax breaks targeted to those most in need.

Keeping an Unfair System Unfair

The Sun-Sentinel's Michael Mayo gives a dispiriting (but probably quite accurate) assessment of Florida's property tax mess in a Sunday column.
True tax reform, and an overall fair and reasonable tax system in Florida, have about as much likelihood of happening as Fidel Castro getting a ticker-tape parade down Calle Ocho.
Mayo's pessimistic assessment is driven by the revised ballot measure referred to voters by the state legislature last month. Since the passage of a property assessment cap known as "Save Our Homes" almost 15 years ago, Florida law has allowed owner-occupied homeowners a tax break that gives the biggest tax breaks to (a) people whose homes are worth the most and (b) people who have owned the same home for the longest time. Who pays for this tax break? In Mayo's words:
Everyone Else (businesses, landlords, recent and first-time buyers, snowbirds).
From a policy perspective, the obvious solution is to repeal "Save our Homes" and enact targeted property tax breaks that are actually geared toward the homeowners, renters and businesses who need it most.

The second most obvious solution is to take Florida out of the diminishing "no income tax" club, enacting a personal income tax to reduce the upwards pressure on state sales taxes and local property taxes.

Both approaches are sound-- but neither is obviously a political winner in the short run. In the spirit of our federal fiscal policies this decade, Florida lawmakers clearly believe that short-term realities require "no losers"-- that is, tax reform shouldn't make anyone worse off.

This is absurd, of course. When you have a group that's received wildly too-generous tax breaks (long-time homeowners) and groups that have been completely hosed (renters, businesses, first-time homebuyers), true reform needs to gore a few oxen. And Florida lawmakers have steadfastly refused to do so.

What's it gonna take to change this depressing trend? Mayo thinks it'll take "voters going against their self-interest and politicians actually leading." He's only half-right on this score-- while it would clearly require lawmakers to show a little backbone, any shift from regressive property and sales taxes towards a progressive income tax will almost certainly make a majority of Florida's voting age population better off. A better way of phrasing it is that voters would need to see through anti-tax rhetoric and recognize where their self-interest lies-- also no easy trick.

Sunday, November 04, 2007

Handicapping the January Ballot Proposal

In the wake of the Florida legislature's latest property tax plan-- which voters will pass judgment on in January of 2008-- the handicapping has begun. Will the legislature's proposal garner enough support to pass the 60-percent threshold needed? The Palm Beach Post's Michael Bender gives an initial survey that suggests it's got a chance, both because special-interest money might get plowed into the effort, and because bills referred by the legislature have a pretty good track record with Florida voters. Bender also points out reasons why it may yet fall to pieces: it's quite possibly unconstitutional, and special-interest money may yet emerge to oppose it.

One interesting reason for the bill's possible passage is mostly implied, however: no one's ox gets gored, at least not obviously. And herein lies the true problem with the legislature's proposal.

One Republican lawmaker, Ellyn Bogdanoff, asks "What would you gain by voting against it?" And this seems initially to be a pretty sensible question. After all, in the short run, if this thing passes you're either better off or unaffected, in terms of your current property tax bill.

But the question (and the lawmaker's answer, "I don't know that we gain anything," demonstrates the legislature's biggest failing in this process-- its unwillingness to think about the long-term impact of its actions.

The long-run implications are very different from the short term, "no losers" view of this proposal. It's incontestably true that the legislature's latest brainstorm preserves some unwarranted tax breaks (by making the "Save our Homes" tax break portable), gives too-small tax breaks to some groups that deserve them (businesses) and entirely ignores other groups that deserve them (first-time homebuyers). In the long run, the well-founded complaints of these shortchanged groups will leave Florida's tax system just as unpopular, unfair and unbalanced as lawmakers found it last month. But nobody actually loses right now from this plan, which leads to Bogdanoff's question.

Truly forward-thinking lawmakers would ask whether this bill is the right approach for a sustainable, fair and (gasp!) popular tax system. An even marginally-forward-thinking legislature would ask whether the long-term impact of the plan would be better than doing nothing. But Florida's legislative leaders aren't asking even that. They're simply banking that by providing tax cuts for some and tax hikes for no one, they've come up with a solution a majority of Floridians can agree on. And that's a shame.