On January 29, 2008, Floridians get to go to the polls and vote in the presidential primaries and for a constitutional amendment affecting property taxes known as Amendment #1. The amendment's language is a little convoluted and confusing. So I am going to do my best to give an unbiased breakdown on exactly what Amendment #1 is, what it will do, and the pros and cons about it.
You can read for yourself a sample ballot that includes the language for this amendment on the Seminole County Supervisor of Elections Website. Full text of the amendment can be found on the Florida Division of Election's Website.
(Paid ads - links are below.)
The amendment is actually a vote for 4 separate tax changes to the Florida Constitution.
(1) It doubles the existing homestead exemption amount from $25,000 to $50,000. The exemption covers the portion of the assessed value between $50,000 and $75,000. So in order to get the full exemption your property would need to be assessed for at least 75K. Properties with an assessed value between 50K and 75K would get a prorated exemption. However this additional exemption does not include the taxes paid to the school district. (Schools still get their cut.) The average additional exemption will be about $240.
- Pros: Additional tax savings for homestead properties.
- Cons: Loss of revenue to the government. This could be especially hard on governments in rural counties that derive most of their income from residential properties.
(2) Up to $500,000 of accumulated Save-Our-Homes Exemption can be transferred from an existing homestead property to a newly purchased one, so long as the sale of the old home was no more than 2 years prior to the purchase of the new one. The law will be retroactive to include sales from January 1, 2007 forward. If you are downsizing your home you will get a percentage of your accumulated exemption. Specific scenarios on how this works can be found at http://www.yeson1florida.com/scenarios.php . (Currently with it being non-transferable, when a house sells the seller loses the accumulated exemption and the new buyer does not get it either. The only winner is the tax collector.) Details on how the Save-Our-Homes Exemption currently works can be found on the Orange County Property Appraiser's site.
- Pros: Currently people are "trapped" in their home because when they sell they lose their exemption. Move-up and move-down buyers would be "freed" to buy and sell. This may stimulate the real estate market at least slightly.
- Cons: This perpetuates the inequities of the Save-Our-Homes Exemption. The big burden on the property taxes will still remain on shorter-term residents and non-homestead properties. Passing this portion of the amendment may prompt a federal lawsuit for violating the commerce clause of the United States Constitution.
(3) Creates a new exemption for the first $25,000 of assessed value for tangible personal property. If you are a landlord, commercial property owner, or business owner, you are required to fill out an appraisal form every January and list all of your personal property (i.e. appliances, furniture, computers, supplies, etc.). For smaller-time owners, the tax is typically $10-100 per year per property/business. This would basically eliminate this tax altogether except for large commercial properties and businesses - ones that own more than $25,000 worth of business related personal property. (This applies to all taxes including school districts.)
- Pros: It eliminates this tax and associated accounting work for most landlords and small businesses. It reduces the tax for large landlords and businesses.
- Cons: Loss of revenue to the government including school districts.
(4) Puts a cap of 10% per year on how much the assessed value of a non-homestead property can increase. The cap disappears if the property is sold. The cap expires completely on January 1, 2019. It does not apply to school district taxes. It is something like a Save-Our-Homes Exemption for non-homestead property. For instance if a property is assessed at $100,000, then the assessment in the next year will not increase to more than $110,000, then $121,000 in the following year. (Currently non-homestead properties can increase to 150K or 200K or more in one year).
- Pros: Puts a cap on surging increases in assessed value for non-homestead properties.
- Cons: Perpetuates the inequities and non-portability issues (similar to the existing Save-Our-Homes Exemption).
Now I am going to discuss the pros and cons to the amendment as a whole since we have to vote on the whole thing and cannot pick and choose which portions of the amendment we like or don't like.
Pros to the amendment as a whole:
- It does provide definite tax relief to homesteads, landlords, and businesses.
- Save-Our-Homes portability should "free" some homeowners that want to upsize or downsize and are currently "trapped" in their homes.
- It places limits on assessment increases for landlords and commercial property owners for the next 10 years.
Cons to the amendment as a whole:
- It cuts revenues to all levels of government except the school districts.
- It perpetuates the inequities of the tax system as a whole by rewarding long-time residents and long-term property investors with lower taxes while charging increased taxes to shorter-time residents and investors as well as new buyers for all property types.
- The political groups against this amendment claim it would cause apocalyptic type service cuts and layoffs in police, fire, rescue, parks, and similar services. (School districts are exempt from most of the tax cuts and caps.) I do not know the validity of this claim. Obviously taxes would be cut, but over the last 7 or so years tax revenues have dramatically increased (nearly doubling in many jurisdictions) and the cuts are relatively minor in comparison to the increases.
- It does not address some very basic issues. (1) It does not cut millage rates or assessed values except in a limited form geared toward homesteads and tangible personal property. (Many property's taxes are still high and will not get cut back at all.) (2) It does not give new buyers any sort of tax break. They will pay tax on the existing high assessment amount minus a 50K exemption for homesteads.
Now I am going to discuss what might happen if this amendment passes or fails (besides the obvious existing issues mentioned above). Please remember that this amendment needs at least 60% of the voters to approve it in order to pass.
What might happen if this amendment passes:
- The legislature and government may decide that the property tax issue has been solved and not try to make any further changes or fixes. However some members of the legislature along with the governor have stated that they will push for more tax reform in 2008.
- The amendment may get challenged via a federal lawsuit. This is especially true about the Save-Our-Homes portability portion of the amendment.
- Local governments may just find alternative means of raising their revenues like increasing impact fees, utility fees and rates, sewer and water hookup fees, permit fees, user fees, recreational fees, parking fees, etc., etc.
What might happen if the amendment does not pass:
- The legislature and definitely the local governments might state that "the people have voted and they do not want any more tax relief." Many local government officials and government labor unions are saying similar things right now. If it does not pass, further legislative attempts at tax relief may not happen.
- The next chance for the people to vote on a constitutional amendment will be in November 2008 which will affect tax bills that come out in November 2009.
Here are some 3rd party sites that provide additional information about the amendment. All these websites have their own agenda. http://www.votesmartflorida.org/ , http://www.yeson1florida.com/ , http://www.saveourservices.info/ , http://www.floridaisourhome.org/ .
Another site that has a unique idea to try and fix property taxes is: http://www.cutpropertytaxesnow.com/ .
I hope this detailed analysis helps in your decision making. Please do not ask me for a breakdown of the presidential candidates. You are on your own for that one. :-)
Added 1/28/08: Here is a link to a television interview I did on Fox News 35 regarding property taxes.
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(Copyright © 2008. Sand Dollar Realty Group, Inc. All rights reserved.)
Rob Arnold, ABR, CPL, CRB, GRI, Managing real estate broker, Licensed mortgage broker, Notary Public
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Can you explain this part of the language in the ballot?:
b. Provides for homestead exemptions to be repealed if a future constitutional amendment provides for assessment of homesteads at less than just value rather than as currently provided at a specified percentage of just value.
If you read the full version of the proposed amendment (as opposed to the ballot version), this language you referenced is deleting the paragraph on page 10, lines 5 through 19 of the law. The existing law has old sort of obsolete language from the early 1980's when the homestead exemption was orginally passed.
Rob:
Thank you for posting this information. This is good information for Floridians.
Thanks for the unbiased information. It's hard to find that anywhere, most things I've been reading are either for it or against it and it shows. I just wanted to know more about it and I feel that you answered a lot of my questions. Thanks for your help!
LET'S START BY ELIMINATING THE IRS AND ENACTING THE FAIR TAX.
Bill - Thanks. I am speaking about this a several of the investment clubs all week, so I wanted to give everyone something to refer to.
Greg - Thank you. I tried hard not to show an opinion one way or another. I have made up my mind and cast my vote already though.
Bob - I am all for the Fair Tax. That would not affect property taxes though. Property taxes are at the state and local level.
HOPE IM WRONG..But don't think so!
AS I read the actual IMPLEMENTING LEGISLATION. Seems If this amendment gets passed all currently homesteaded property will be RE-ASSESSED to "Just Market value"...and then a "$50,000 exemption" will be knockd off THAT figure. ... So if you bought back in say 1994 and you are "tax assessed" now at $100,000 but your CURRENT "JUST VALUE" is $300,000 YOU WILL LOSE OUT BIGTIME! Read this phrase direct from the implementing legislation:
"5 (c) All persons entitled to a homestead exemption under Section 6 of this Article shall have their homestead assessed at just value as of January 1 of the year following the effective date of this amendment. "... SCARY
In my example currently a homesteader with a tax assessment of $100,000 subtracts $25,000 homesteas ex. and pays tax on $75,000.
If admendment1 passes a the homesteader gets reassessed to $300,000 then subtracts the new $50,000 exemption but pays tax on a whopping $250,000!
Read the Assessment Legislation at this link and WEEP:
http://election.dos.state.fl.us/initiatives/fulltext/pdf/10-68.pdf
I hope Im wrong but I feel we are about to be shafted....Sure Realtors would love this because many "fixed incomers" would have to SELL and move away because of the new TAX burden
If Im wrong please reassure me...ANYBODY..where's the press coverage on this?
To make it easy to get the real Scoop on this Bad News: GO HERE:
http://election.dos.state.fl.us/initiatives/fulltext/pdf/10-68.pdf
Scroll to: Article 7: Finance and Taxation....then scroll to
Section 4: Taxation and assessments... (here's where legislation calls for a total re-assessement of all homesteaded property) find this:....
""5 (c) All persons entitled to a homestead exemption under Section 6 of this Article shall have their homestead assessed at just value as of January 1 of the year following the effective date of this amendment. " VERY SCARY....
Section 6: Homestead exemption...(here is a discussion who is homestead exemption entitled)
IF IM WRONG PLEASE ENLIGHTEN ME!!!!
NOWHERE HAVE I READ THAT current long term homesteaders will keep their "current taxable assessment" under the "save our homes" amendment of 1995.
To Anonymous poster MORE BEWARE - Fortunately for all, YES YOU ARE INCORRECT.
The additions to the full text are underlined and the deletions have
a line drawnthrough them. Read down at the bottom of each page of the law in the full text and you will see where it explains this. The language you are quoting is already part of the law and has been since at least the early 1990s when Save Our Homes was first put into the Constitution. It is not being added by this amendment. All properties are currently re-assessed every January 1 and then the assessed value gets certified each October. This amendment does not change that fact.Dave - I guess it depends on where you look at it. I am all for cutting government spending.
""4 (c) All persons entitled to a homestead exemption under Section 6 of this Article shall have their homestead assessed at just value as of January 1 of the year following the effective date of this amendment. "
This might have been part of the law of 1990, however nothing specifies that this will not be reimplemented for 2009, upon approval of this amendment.
The limitation on annual assessment increases for specified real property shall first apply to the 2009 tax roll if this revision is approved in a special election held on January 29, 2008.
I read this to say everyones property will be reassessed on January 1, 2009. Then the caps will apply.
Where does it specifically say our 2009 taxes will not be reassessed to just value on Jan 1,2009?
Stan you are just casting pointless doubt. Christ would be crucified if this ammendment undid all the permanent residents and retirees built up save-our-homes taxes and put them in the streets. He couldn't even sell used cars after that one.
The real scam is all these quotes from supposedly concerned citizens that say "Services may be cut" Everyone knows taxes != service. Did we get more service when the revenues more than DOUBLED due to the years of new construction and property value increases?
If they stole your wallet and you were to stupid to know you had a few grand in it, they would give you back $5 bucks, complain about hunger pains, and ask for a reward.
I'm still not clear on whether we're going to be completely re-assessed come 1 Jan 2009, or if that assessment will remain capped at 3%. Votesmartflorida.org is saying that in either case, homesteaders keep the SOH 3% cap.
Seems like y'all are saying either way (Amendment #1 pasage or non-passage) we'll get completely re-assessed. Am I missing something?
Good pros and cons for people to decide. We can't possibly believe this will effect the schools and government programs. What happened to all the influx of taxes that came in during the last three years? What did they do with all that money. Did it go to schools? Did it take away from every other program, or give more? NO
Give the people back the Tax Money thats due them.
Let the Florida Lottery money pay for the schools. Wasn't that promised us also?
Dan - There is nothing in the language of this amendment that I am aware of that calls for the property appraisers to re-assess anybody. There was something about that I believe in an old proposal that the courts threw out in October. There is apparently some confusion and Governor Crist has been on TV lately re-assuring everyone that the amendment does not call for a re-assessment or an elimination of the 3% Save Our Homes cap.
Nicholas - No doubt about the government spending issues. How did the local governments survive back in 2001 and earlier when they did not have BILLIONS of extra dollars in their coffers?
Nicholas - No doubt.
Tim - As you can see from the length of my original article, the property tax issue is quite long. That is why I tried to explain it as best I could. You are right it is confusing. Odds are that because of all this confusion it probably will not pass.
Tim-I completely agree with your comment. It is too convoluted and confusing.
I learned from a colleague that it was drafted in one week's time. If this is an accurate statement, need I say more about the negative implications?
I also commend Rob for providing us with a variety of info not specific to a particular organization.
After review of all, I'd have to say I have more concerns about passing the legislation, than forcing them to reconsider for a better attempt at stimulating the economy. In addition to not understanding how services may be affected, or whether re-assessments would be more damaging than usual, I do believe changing the millage rate would be a smarter attempt. After all, Florida's growth and prosperity has been and will continue to be dependent in part on those who would not benefit from this legislation as written.
Brad - I believe this amendment was drafted very quickly, however the ideas behind it were not. Governor Crist campaigned on the first 2 parts of this amendment, so those have been floating around since early 2006. The 3rd part of the amendment was in the orignial amendment from June 2007 that got thrown out by the court. The 4th part I am pretty sure is new though.
Lori - You may want to check out www.cutpropertytaxesnow.com . I sent in my petition already.
NOW FOR MY PREDICITIONS ... DRUM ROLL ... I PREDICT THIS AMENDMENT WILL NOT PASS TOMORROW. I THINK IT WILL BE PRETTY CLOSE, BUT NO CIGAR. IT NEEDS 60% OF THE VOTES TO PASS.
Simon - What can I say? I am surprised by the amendment passing. Hopefully it will do the state and its people some good.
Lacey - Thanks. I hope it helped out.
Simone - I think the nay sayers fall into 2 categories. 1 are the people that think that this amendment is just a band-aid and does not fix the overall problem of crazy tax and spend by local governments. The other are the kind of brainwashed government people - people that work for the local government or work for government employee unions - those people would be upset if the taxes were cut even by one penny.
My understanding is that the amendment became effective on the day the voting was certified (last Tuesday). It is retroactive to all home sales from 1/1/07 forward.
is the current Florida market as bad as we here on the news. From the national news channels it is all gloom and doom. Is it leveling off or getting worse? I am very interested because the Florida market directly affects our market in East Tennesse.
Brian - It's it very tough here. It is difficult to retail properties because buyers are scared and inventory is plentiful. I believe the market has for the mostpart bottomed out though.
I stand for very low taxes. Goods and services provided by govt never equal those provided by private companies that have to compete. I hope your state lowers property tax.
Wow...
Chance and HOPE hold large expectation! Those who believe in this country will be held to a high standard which equals ===== RESPONSIBILITY!
Those who chose Mr. Obama will get what they asked for, I hope for them to prove us wrong
This is a day of HISTORY, We will soon see. The proof is in the pudding?
McCain and Palin did EXTRAORDINARY! Under the circumstances
Rob hold your head up high! Stay True to You! The Truth Will Prevail!
If it keeps the way it is going there will be no "Fillibuster" Keep the Faith!
Wow there was so much great information in your blog, thank you.
While some relief has been realized, our problem is this takes Florida into the realm of the 27th highest state tax wise to move to. Add the legal system that so many have called a haven for trial Lawyers and you can see why we no longer have double digit growth. In fact the trend has reversed itself. This in a Republician controlled House. How long will we have to wait for some real leadership to emerge. We answer that question with our vote every two years in the House and every four in the Senate. I'm running in HD 51, the answer may be forthcomming.
Larry Ahern - If I could have drafted this Amendment myself, I would have done it much differently. The tax situation in Florida is greatly out of whack. Not sure what the problem is in the Florida state government. Jeb Bush was the last true leader we had. I don't see much leadership in anyone from Tallahassee right now or those running in 2010.
Please do whatever you can to make a difference. We need some fair and equitable tax legislation passed. Even though I know everyone is running scared because of the current budget crisis.
Where is HD 51 ?
I THINK THE FIRST AMENDMENT IS GREAT