Environmental Cost of Property Tax Cuts?

In the wake of a June special session of the state legislature that imposed major property tax cuts on Florida local governments, the drumboat of endangered local government services continues. The Orlando Sentinel documents the potential impact of these cuts on efforts to preserve Florida's delicate ecosystem:

State property-tax changes could put a financial pinch on some of the area's biggest environmental efforts.The Lake County Water Authority has planned for years to start two projects aimed at cleaning up the Harris Chain of Lakes. A $15 million proposal would remove a delta of sand and organic materials from Lake Beauclair -- a massive mound of deposits caused by years of polluted water coming downstream from Lake Apopka.Another project would divert water from Apopka-Beauclair Canal and clean up pollutants before the water reaches Lake Beauclair and the rest of the Harris chain. That could cost more than $7 million to build and up to $1.2 million each year to operate. The Water Authority has saved millions to help pay for some of the work. But the agency still needs future funding for these and other proposals.

Does this mean these projects will be hamstrung, or even cancelled outright, as a result of the pending property tax cuts? It's clearly too soon to tell. But the folks who are making the planning decisions on these important projects are obviously nervous about the impact Florida property tax cuts could have on their ability to fund these services-- and this nervousness is affecting their decision-making process:

The financial uncertainty may impact how the Water Authority moves ahead with its huge projects."With us needing more and fearing a cut in property taxes, we're like most everybody else -- we don't know what will happen," said Water Authority board member Nancy Fullerton.

For Floridians who are desperate to understand whether the property tax proposal they'll vote on in January is going to be affordable or not, it's of the highest importance to know whether the Water Authority boards and their ilk are crying wolf, or whether the pending cuts would eviscerate important local efforts at environmental conservation. Neither the Sentinel's article, nor this blog post, can pretend to answer this question. But this uncertainty is a direct consequence of the way Florida lawmakers decided to cut taxes this year. If they'd cut state taxes, they could have simultaneously identified cuts on the spending side that would make these tax cuts affordable, and brought things into balance. But because they chose to cut local taxes, Florida lawmakers didn't have to worry about enacting these cuts at a level that would be affordable. They could enact big cuts, and let locals figure out how (if at all) they could pay for them.

When the state mandates local tax cuts, but doesn't provide the financial support needed to ensure that these cuts will be affordable, that's a recipe for fiscal uncertainty at the very least-- and, in the worst case, fiscal disaster.

Proposition 13 Redux?

Survivors of California's "Proposition 13" tax revolt know that good intentions can go bad pretty fast. In particular, the lesson Californians have learned is that when you force unaffordable local property tax cuts, locals usually can't just reduce their total revenues by the full amount of the cut. Some of the property tax cut will have to be made up through hikes in other taxes or fees. And the most likely outcome is that the revenue will be made up in a way that's less visible- instead of one big tax, a lot of little nickel-and-dime stuff.

There's evidence emerging already that this is exactly what's going on in Florida, as local governments deal with the state-mandated property tax cut passed in a June 2007 special session. Florida Today has the story:

Facing a property tax shortfall of $4.1 million, city leaders may start enacting a minor tax on residents for drinking water,taking showers and filling swimming pools.
After more than an hour of debate recently, the Melbourne City Council decided to pursue a new 10 percent utility tax on water sales.

This is nothing new in Florida, of course. Local government collections from utility taxes on electricity, water and other utilities are estimated at about $1 billion for fiscal year 2007. Even in Florida, that's some serious money.

The question is, how can this tax swap be justified on fairness grounds? Lawmakers have demonstrated an (arguably sensible) aversion to taxing what they consider "necessities" such as food and utilities. The city of Melbourne is about to take exactly the opposite step, taking a path that many other Florida municipalities have already followed.

Of course, a tax on water consumption will hit businesses too. But that was also true of the property taxes the city will no longer be able to collect this year as a result of the state's actions in June. So this can't really be justified as an effort to make businesses pay more-- not that any city council member in Melbourne would have said so anyway.

The truth is most likely that Melbourne is taxing water because it's the tool that is available to them. They're doing it because the alternative is painful cuts in the services the city provides to its constituents.

This may be smart politics, at least for state lawmakers. But it's dumb policy-- and it's a policy that will inevitably make Florida's tax system even more unfair.

WSJ Weighs In on Florida's Property Tax Debacle

As a state lawmaker, you know you've made the big time when the Wall Street Journal's editorial board singles your tax ideas out for attention. A June 30 WSJ editorial (sorry, no link for nonsubscribers) takes note of Florida's property tax situation:

Florida family incomes have risen by a healthy 37% since 2001, but average property tax bills have climbed by 83%. In some communities, such as Boynton Beach, average property tax bills have tripled in seven years. Politicians tell of town hall meetings where angry constituents announce they are literally being taxed out of their homes.

The Journal notes approvingly that lawmakers have voted to cut property taxes-- but sees a danger ahead:

The catch is that this must be approved by 60% of the voters in a January 2008 ballot referendum. And already the liberal interests that feast on local spending -- government employee unions, contractors and local politicians -- are predicting Armageddon for schools and city services if the tax cuts are enacted.
House Speaker Marco Rubio, who has led the charge for property tax relief, says local governments have already spent $24 million of taxpayer money to lobby against the initiative.
With many municipal budgets having doubled in size over the past eight years, many Floridians are unimpressed with these sudden exclamations of empty city wallets. Taxpayer groups point to numerous examples of flush spending by cities and counties in recent years, including $32 million for a new municipal golf course in Palm Beach -- a county that already has 160 courses.

So, the Journal's story is basically the same as Rubio's: local governments are crying wolf. They've made out like bandits over this decade, and are terrified that the fat times will end. But in the end (the Journal's narrative goes), they'll be able to trim the fat in a way that makes these tax cuts eminently unaffordable.

The missing link here, of course, is a sense of what's happening to state tax collections--and state aid to local governments. The narrative the other side is telling is that the state has enacted a raft of unaffordable tax cuts over the past decade, and has paid for them by cutting state aid to locals--which has inevitably meant that locals must hike their property taxes just to pay for basic services. Is the other side correct? Maybe-- I haven't seen a compelling statistical argument on this front, but that doesn't mean it's not out there. But the WSJ is following the Rubio party line by pretending that cuts in state aid aren't even part of the story.

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.

Florida's Sales Tax Holiday: Back Again

Tomorrow marks the beginning of Florida's latest "sales tax holiday." This time around, purchases of various "storm-related" items will be sales-tax-free for the next 12 days.
Items that are temporarily tax-exempt include batteries, generators, tarps, storm shutters, and carbon monoxide detectors.

Lawmakers wanted to make it easier for Floridians (and, in fact, non-Floridians who happen to wander through a Florida Home Depot anytime for the next two weeks) to purchase storm supplies-- but they clearly didn't want them to go overboard. That's why the temporary exemption for flashlights, for example, specifies that flashlights costing more than $20 aren't exempt. Similarly, if you want your portable radio to be tax exempt, it better cost $75 or less. The bill that enables all this, HB 211 of 2007, is here.

The direct cost to the state from lost state sales tax revenue is estimated at $20 million. In addition, administering this 12-day tax break will cost the state about $290,000.

We've written before about the shortcomings of sales tax holidays as a tax policy tool. They reward consumers who have the flexibility to make their purchases during this two-week period. They make tax administration more difficulty by forcing retailers to work with two sets of rules governing sales tax exemptions: those in force for the next 12 days, and those in force the rest of the year. And above all, they allow lawmakers to bask in the P.R. glow of having enacted a tax cut (and one that probably benefits low-income families most, as a share of their income), without actually adding up to any real savings for these families-- and without doing a thing to mitigate the overall unfairness of the Florida tax system. In sum, it's a "sound and fury" tax break-- all hat and no cattle. Read ITEP's policy brief on sales tax holidays here to find out more.

The Florida Department of Revenue has more information on the holiday here.

Local Governments and Property Tax Reform: No Longer Crying Wolf

As local governments loudly protest the likely impact of the local property tax cuts that will likely be imposed on them by Florida lawmakers in a special session next month, some lawmakers (in particular, House leader Marco Rubio) have argued that locals are merely crying wolf when they say these cuts will be unaffordable.

But as today's Times-Union notes, some local governments are already doing more than protesting.

[Jacksonville Mayor John] Peyton has asked his staff this month to reorganize
the government in an effort to save money in anticipation of state property tax reform expected to drastically reduce the city's revenue next year.

The headline today: Peyton has eliminated the position of "parks director" from the city's administrative structure.

Is this "trimming the fat" or hamstringing an important and basic function of Jacksonville city government? That's in the eye of the beholder, of course. But the point here is that Jacksonville leaders are worried enough about the impact of impending property tax cuts that they're already taking a scalpel (or a hacksaw, depending on your perspective on the importance of parks to a city's well-being) to basic government functions before the special session even begins.

Things obviously will get even less fun for Jacksonville and other cities if Rubio's property tax cut plan goes through next month.

More Locals Enacting Senior Homestead Exemption

In yesterday's St. Petersburg Times, Eileen Schulte notes that a growing number of local governments are using their new authority (granted by the state in the 2007 regular legislative session) to double the local-option property tax homestead exemption for low-income seniors.

This means some seniors in selected areas of Pinellas County will get an exemption for the first $75,000 of value in their house. (The state offers a basic $25,000 exemption; an existing local-option exemption, authorized in the late 1990s, allows locals to piggyback another $25,000; this year's legislation allows a third increment of $25,000.)

If this sounds like a pretty big exemption, it is-- but it's important to remember that unlike the utterly un-targeted all-ages tax breaks being discussed by the legislature so far this year, the senior homestead exemption is limited to the low-income families who need it most. In particular, seniors with incomes exceeding $23,000 or so can't get the extra $50,000 local-option exemption.

Simply expanding this exemption to all age groups would be a simple way of trying to cope with anti-property-tax angst-- but would do nothing at all for Florida homeowners with incomes over this very low level, so that's not the answer for the Sunshine State.

But some variation on a means-tested homestead exemption is a pretty good idea. With higher income eligibility limits, this is the sort of solution Florida lawmakers ought to be looking at-- if they can ever figure out a way to pay for it.

New Ideas for Property Tax Reform

With about three weeks left to go before a scheduled special legislative session on property tax reform, a joint House-Senate committee is listening to new ideas about how to reform the state's homeowner property tax breaks. The idea of the day: percentage-of-value homestead exemptions.

It's a simple idea. Right now, most Florida homeowners get to exempt the first $25,000 of potentially taxable value from all property taxes. From the cheapest shanty to the most expensive mansion, every home gets the same basic exemption. But several proposals discussed in today's hearing would change the homestead exemption from a flat-dollar amount to a percentage of a home's value.

To see the impact of such a change, take two neighboring homes: one valued at $100,000 and the other valued at $1 million. The current $25,000 exemption provides the same dollar amount of tax cut for the houses. But a percentage-of-value cut of, say, 25%, would give the low-valued house a $25,000 exemption (the same as it gets now) while the higher-valued house would get a $250,000 exemption-- ten times as big as the poorer house.

As this example indicates, the big winners from such an approach would be owners of expensive houses-- hardly a tax-fairness strategy that most lawmakers would champion.

But lawmakers also heard two wrinkles on this broad plan today that would allegedly make the percentage-of-value homestead less unfair. One idea would apply lower percentages to higher-valued houses. In the previous example, the higher-valued house might get an exemption for 25 percent of value up to a certain amount (say, $300,000 of home value) and then an exemption for 15 percent of all value above that. This would still leave the wealthy homeowner better off: their exemption would be $180,000 under this approach (25% of $300K is $75,000; 15% of $700K is $105,000), which is more than seven times higher than what the lower-income homeowner would see in tax cuts.

So it's less unfair than a simple percentage-of-value exemption-- but not by much. And this sort of exemption certainly wouldn't be the most transparent approach to property tax cuts. (Although by comparison to the much-lamented "Save our Homes" tax break, it sounds remarkably straightforward.) And neither of these proposal would do much to target property tax breaks to those homeowners who are truly (to coin a phrase) in danger of being taxed out of their homes. Got a home? You'd get a tax break.

The second twist on this basic tax cut proposal heard by lawmakers today would vary the percentage exemption not by the value of the house but by its geographic location. The bigger a district's median home value, the bigger that district's homestead exemption would be. This approach is certainly a refreshingly new approach to inequitable property tax cuts, but is inequitable nonetheless. Reserving the biggest property tax breaks for the wealthiest areas will be cold comfort for fixed-income families living in less-wealthy districts who are nonetheless simply unable to pay their property tax bills-- and will provide a huge boon for many upper-income families who simply don't need such a tax break.

Florida wouldn't be the only state with such an upside-down property tax break. The New York Fiscal Policy Institute's Frank Mauro has beaten the drum convincingly for years to get rid of a similar, poorly-thought-out homestead exemption in New York called the STAR program. As ITEP pointed out in a 2005 study, providing bigger exemptions to wealthier districts creates inequities that are hard to justify:

[T]wo homeowners with the same income and the same home value can receive dramatically different exemptions simply because they live in different counties.

Unjustifiable discrimination between the tax treatment of identical houses is nothing new in the home of the Save our Homes tax break, of course-- but that's no reason to try it a second time.

Property Tax Cuts: 'Fatal" to Local Governments?

Florida House Speaker Marco Rubio thinks that local governments have a spending problem. And while he's expressed interest in a number of approaches to resolving the state's property tax dilemma, a common theme throughout has been requiring local governments to slash their property tax collections-- and not giving them a way of paying for the cuts.

But as Charles Rabin and Breanne Gilpatrick document in today's Miami Herald, a growing number of local governments are sounding the alarm.

''What the Legislature is proposing would kill us,'' said El Portal Village Manager Jason Walker. "We're not going to afford a police department anymore. No manager. No staff. It's going to go back to a single clerk.''

The solution that's scaring Walker and other local leaders? What Rabin calls a "super-sized homestead exemption." Details are fuzzy, but the general idea is that the existing $25,000 homestead exemption would be replaced by a percentage-of-value homestead exemption that would give larger exemptions to more expensive houses.

As Rabin and Gilpatrick correctly note, not every local government is paralyzed with fear at Rubin's latest brainstorm. In particular, towns that have a big non-residential tax base-- hotels or other businesses, for example-- have less to fear from a state-mandated tax break that goes only to residential homes.

Are these local officials crying wolf, as Rubio appears to think, or do the threatened state property tax cuts truly threaten Florida locals' ability to fund important services? The truth almost certainly varies from city to city. But one thing is for sure-- for taxing districts that are truly cash-strapped, the "super-sized" homestead exemption will push these districts unnecessarily closer to fiscal insolvency. A less costly approach, such as a "circuit breaker" tax credit, could help target tax relief to the fixed-income families who truly need it at a much lower cost. So the real question isn't whether Jason Walker and his ilk would truly be "killed" by the emerging legislative proposal-- the question is why Florida lawmakers would take such an unnecessary risk with better options available.

Florida Lawmakers' Property Tax Shell Game

The Sun-Sentinel's Anthony Man puts two and two together-- and notices that Florida lawmakers' actions on property tax reform this year didn't really match their rhetoric:

The Florida Legislature ended its annual session without achieving its No. 1 goal: reducing property taxes. Legislators did, however, vote to increase property taxes by $546 million.It happened because of the way Florida allocates money for schools. The new state budget, effective in July, increases spending on education and orders local school boards to charge higher property taxes to pay for it....In other words, representatives and senators of both parties voted for higher local property taxes for schools at the same time they were declaring property taxes in Florida have reached crisis levels and must be cut.

The Sun-Sentinel's Man clearly sees this as an act of cowardice and hypocrisy on the part of legislative leaders-- and he's probably right:

Lawmakers could have reduced property taxes for schools, or held them steady, without cutting money for classrooms by shifting funding priorities in the state budget. But that would force them to make difficult spending choices -- just the way they want municipal and county governments to make tough choices about local spending.

Man's criticism is right on. The ongoing Florida fiscal crisis was created, at least in part, by the unwillingness of state leaders to enact sustainable tax reform at the state level. Instead, they cut state taxes pell mell and "paid for it" by shifting costs to local governments. For local leaders facing the prospect of budget cuts, the hypocrisy of state leaders' insistence that locals must make difficult fiscal policy choices must seem gallingly hypocritical. At long last, state lawmakers should be called to account for this fiscal shell game.

ABC's "Nightline" Gives Rubio a Free Pass on Tax Reform

House Speaker Marco Rubio's tax plan-- which would cut property taxes dramatically and offset some of the revenue loss with a higher sales tax-- has been (correctly) criticized as a tax shift that will hit the poor hardest. But little attention has been paid to Rubio's stance on the property tax as a revenue-raising device, which is essentially that he hates it:

Should we tax the American dream? We don't tax food or medicine in Florida. Why would we tax home ownership? But we do.

The comparison is a bit silly on its face. Like our homes, food and medicine are what most people would consider "essentials"-- things we can't live without. And more and more starts now are exempting both of these purchases from their sales tax. But food and medicine are just part of each state's sales tax base. If you exempt them, you've still got plenty of consumption left to tax. (Although states exempting them have to increase the rate on everything else to keep themselves whole.) But repealing the real property tax, even if it's only done for homeowners, would basically eliminate an entire tax base. Given the zeal with which Florida lawmakers have moved to completely exempt other types of property (like intangible stocks and bonds) in recent years, it's clear that what Rubio proposes is simply wiping a tax off the face of the map.

So when I saw that ABC's Nightline was doing a story on the emerging Florida property tax mess, I was heartened. Hey Nightline, you're gonna ask Rubio to explain why repealing the nation's oldest major tax is a good thing, right? Let's hear the hard questions:

CHRIS BURY (ABC NEWS): In your heart of hearts, would you like to do away with the property tax altogether?
REPRESENTATIVE MARCO RUBIO (REPUBLICAN): I think the property tax is a horrible way to tax people.

And the interview sorta stops right there. Not the most incisive questioning.
So here's what Nightline should have asked Rubio:
1) Isn't a well-administered property tax based on a pretty decent measure of ability to pay-- the value of your home?
2) And to the extent the property tax falls short of this goal (as it arguably does when home values are skyrocketing in a temporary way), aren't there approaches, like a circuit breaker credit or assessment cap, that are demonstrably better ways of fixing this problem than outright repeal?
"Reform, not repeal" is a tired refrain. But that's because it's a pretty sensible tune to be humming. You simply can't argue with a straight face that the property tax cannot be reformed and must simply be junked-- there's just no legitimate argument to make on this point.
Which makes it a shame that Nightline didn't ask just that one hard question.

Ding Dong, The Witch Is... Going on Vacation

Reuters reports that Florida lawmakers have given in to the inevitable and thrown in the towel on their efforts to craft a big fat property tax cut before the end of the regular legislative session.

The good news is that this was exactly the right thing to do. Various editorial boards have pointed out that a poorly constructed tax reform thrown together at the last minute could be worse than no tax reform at all. The St. Petersburg Times explains quite well what a good property tax fix should do:

Floridians need property tax relief, but they need it done right. That means it has to be equitable, fair and reasonable. It should be targeted toward the taxpayers who need it most: businesses, nonhomesteaded property owners and recent home buyers. It should spread the tax burden, not merely shift it from one group of taxpayers - homeowners - to another - consumers who may not even own property. And it should not force local governments to make painful cuts in programs and services that residents expect in safe, vibrant communities.

Which makes it unfortunate that the plans being debated by the House and Senate this past week pretty much don't achieve any of these goals.

And which leads us to the bad news: the legislature will be back for a special session in June, and all indications are that they'll be discussing the same basic plans they've been fighting over for the last couple of weeks. The sense you get from reading lawmakers' quotes this week is that they've got broad agreement on most things, but simply don't have time to iron out all the details before the session is scheduled to adjourn at the end of the week. Here's House Speaker Marco Rubio:

“The good news is I believe we have made tremendous conceptual progress in our conversations with our colleagues the senate. We can feel confident that property tax relief and reform is going to happen for Floridians and God willing, it’s going to happen this year,” he said.“The bad news is, and it’s really not all that bad, is that in order to put this into practice 72 hours simply is not enough time."

In other words, the solution lawmakers come up with next month is going to be a cross between the House approach (an unaffordable, unfair property tax-for-sales tax swap) and the Senate approach, which is merely unaffordable. So to paraphrase Rubio, the good news isn't all that good, and the bad news remains pretty bad.

Tax Debate: "Caught Between the Bad and the Ugly"

As Florida lawmakers totter toward the May 4 conclusion of this year's legislative session, conferees are feeling growing pressure to come up with a solution-- any solution-- for the state's property tax woes. Yet, as the Daytona Beach News-Journal editorial board points out, there are good reasons to resist this urge:

The best course of action for Floridians is none at all. The constitutionally mandated Taxation and Budget Reform Commission starts a comprehensive review of all taxes this year. There's no reason for the Legislature to push bad legislation forward, and plenty of reasons to step back and cool off.

Regarding the specific shortcomings of the plans put forth by the House and Senate so far, the News-Journal faults the Senate proposal for expanding the much-lamented "Save Our Homes" tax break rather than repealing it, but thinks the House plan is much worse:

The sales-tax swap is a bare-faced shift of tax burden onto the shoulders of low-income Floridians, and an even more blatant picking of city and county government pockets. (House leaders claim they plan to redistribute the money to local governments, but lawmakers also promised several years ago to stop hitting local governments with unfunded mandates, a pledge broken almost immediately.)
All told, the House measure would carve as much as $47 billion from local governments' coffers. It's money most can't afford to lose and still keep providing services demanded by city and county residents.

This is all dead on. None of the plans currently on the table achieve the sort of meaningful reform that Florida really needs. If Florida property taxes are to "drop like a rock," as the Governor has requested, it should be done in a way that eliminates inequities in the current property tax and doesn't leave locals holding the bag.