Vol. 8 No. 27 - March 26, 2008

REAL ESTATE

Voters to decide on historic tax plan

Is it my imagination or is it true that since I moved to Florida 10 years ago the state has gone from a warm affordable state in which to kick back and retire to making history practically every year?

We had the incredible run up in housing prices, followed by the incredible downward spiral in housing prices, then we had the 2000 presidential election squabble, major hurricanes, insurance costs through the stratosphere and another presidential election squabble. When will it end and let us all just relax? Well, apparently this year is going to be another history maker so don’t plan on relaxing for long.

In January, the voters in Florida passed the constitutional amendment regarding property tax exemptions. At the time, many people felt it didn’t go far enough to relieve the tax burden on Florida homeowners, especially non-homesteaded owners. We were promised that this was not the end of tax reform, and, by golly, someone in Tallahassee really meant it.

The someone who meant it was the very powerful Taxation and Budget Reform Commission. This commission, which meets every 20 years, has the power to put a constitutional amendment directly on the ballot, bypassing the state legislature, and that’s just what it did.

The history-making tax plan, that you will be asked to vote for or against on Nov. 4, proposes to eliminate the portion of the property tax bill that goes to schools, known as the “required local effort.” On my tax bill, this amount was over a $1,000 which represented about 30 percent of my total tax responsibility. The estimate is that, on average, Florida homeowners will save about 25 percent on their annual tax bills starting in 2010.

The proposal also provides for non-homesteaded property owners, businesses and other properties to be eligible for a 5 percent cap on their annual assessments, similar to the 3 percent cap now enjoyed by homesteaded homeowners. The portability provision and doubling of the $25,000 homestead exemption passed in January remain in place.

Sounds great, right? But how do we pay for the education of our children? Well, what the Taxation and Budget Reform Commission essentially did was tell the Florida legislature that it had to find a way to come up with the shortfall of over $9 billion dollars.

Most likely, if the amendment is approved, the legislature will increase the state sales tax by a penny, cut state budgets and eliminate some sales-tax exemptions. Since the legislature will be required to keep school budgets whole before the 2010-2011 school year, you will probably see a combination of all three, including sales taxes on services never before taxed.

From a real estate point of view, I’m in favor of anything that will move the real estate market. Remember that as the real estate market goes, so goes a good portion of the economy. The trickle down effect of a healthy real estate market can’t be overstated. Everything from revenues generated from sales taxes on home furnishings and products to tax stamps on real estate transactions are substantially increased when real estate moves at a fast pace.

The timing of this amendment couldn’t be better. We are at the tip of the baby boomer iceberg roaring down the East Coast. Lower property taxes and a vigorous real estate market will guarantee that it won’t get stuck in North Carolina. Let’s all make more Florida history this year by reinventing the tax wheel. Maybe then we can all sit back and relax.


AMISUN ~ The Island's Award-Winning Newspaper