Tuesday, June 19, 2007

Proposal for Biggest Tax Cut In Florida History

Property Tax Q&A: What 's next?

The Florida Legislature has OK'd the biggest property-tax cut in state history. But a lot of uncertainties remain buried in the complex, $23.6 billion plan.

A: Cities, counties and other local governments will cut their property-tax collections by $15.6 billion statewide. That will be reflected in November tax bills received by all property owners, including primary homeowners, second-home owners and businesses.

Q: How much will I save?

A: That will vary across Central Florida, from 2.9 percent in Altamonte Springs and 4 percent in Orange City to 10 percent in Orlando and Winter Park. You can calculate how much you will save at OrlandoSentinel.com/propertytaxes.

Q: What about future years?

A: Increases in property-tax collections will be capped at the rate of personal-income growth -- which has averaged 4.2 percent a year during the past 20 years. If property values go up higher than that, a city or county would have to reduce its millage proportionally -- or vote to raise taxes.

Q: When does the new homestead exemption kick in?

A: Voters will decide Jan. 29 -- the date of Florida's presidential primary. If 60 percent approve, it will take effect on November 2009 tax bills.

Q. How would this "super exemption" work?

A. It chiefly benefits owners of homes worth less than $500,000. It would exempt 75 percent of the first $200,000 of a home's value, and 15 percent of the next $300,000.

So a home worth $200,000 would be taxed as if it were worth $50,000. A $300,000 home would be taxed at $135,000. A $500,000 home would be valued for taxes at $305,000.

Any value above $500,000 would be taxed in full. So a $600,000 home would be taxed as if it were worth $405,000; a $1 million home at $805,000.

Q. Any other provisions?

A. The minimum exemption any homeowner is entitled to would be $50,000; for low-income seniors, $100,000. And the maximum exemption would grow slightly each year, indexed to personal-income growth.

Q. So what's the catch?

A. To get the super exemption, homeowners would have to give up their Save Our Homes protection, which prevents the taxable value of a home from growing more than 3 percent per year. Someone who has owned for several years in a desirable area -- where values have increased 10 percent or 20 percent a year -- is saving thousands of dollars in taxes because of SOH.

And once you give up Save Our Homes, you can't get it back.

Q: Which is better: the super exemption or Save Our Homes?

A: That depends. Initially, about three-quarters of Florida homeowners would save money under the super exemption. But if home values keep rising by 5 percent a year or more, the Save Our Homes exemption begins to be worth more after five to seven years. That's because the value of the super-exemption wouldn't keep pace with rising home values.

Q: Who's better off keeping Save Our Homes?

A: Homeowners who plan to remain in their homes for at least five years might be better off. So might owners of more-expensive homes, because the super exemption steers the biggest savings to homes worth $500,000 or less.

Q. Is anyone better off with the super-exemption?

A: Most owners of less-expensive homes, and people who move. The reason is that Save Our Homes resets every time you move, so you have to start paying taxes on the full value of your new home.

It's worth noting that all homeowners would get some protection by the cap on property-tax collections. Over time, that should result in lower millage.

Q: If I own a business, do I get anything out of this?

A: The state-ordered rollback of city and county property-tax collections ought to lower your tax bills this fall. And the cap on future revenue growth will hold down future increases.

If January's constitutional amendment passes, businesses also would get a $25,000 exemption for taxes on equipment, eliminating that tax for as many as 1 million of the 1.3 million businesses that pay it.

Q: If I rent, or own a second home, what's in it for me?

A: Like businesses, people who own non-homesteaded properties will be helped by the local government tax rollback and cap.Renters will have to rely on landlords passing down any tax savings. But the January ballot initiative does includes incentives to build rent-restricted affordable housing.

Q: What will this do to the state's stalled housing market?

A: Gov. Charlie Crist insists that cutting property taxes will re-ignite Florida's real-estate industry.

Industry professionals are more skeptical, citing the tremendous backlog of homes on the market. The Orlando area, for example, has more than 25,000 homes for sale.

Still, economists say reducing taxes lowers the cost of home ownership. And the fact that legislators finally OK'd a plan may spark action from those buyers and sellers who waited for action out of Tallahassee.

Q. What happens if the amendment fails?

A: The Legislature will go back to the drawing board in the 2008 session, which begins in March. Or it could decide to defer to the Florida Taxation & Budget Reform Commission, an obscure-but-powerful group that is appointed every 20 years to analyze and suggest improvements to the state's tax structure. The commission has the power to put proposed constitutional amendments on the November 2008 ballot.Meanwhile, Save Our Homes would remain the law of the land -- as would the cap on future property-tax collections. Courtesy Orlando Sentinel 6/19/07.