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Closer Look At Tax Reform Reveals Savings And Uncertainty

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The Tampa Tribune

Published: September 21, 2007

A bungalow for sale on North B Street in Tampa has become a poster home for tax reform.

Gov. Charlie Crist stopped by the house for a press conference earlier this week to plug a proposed change in the state constitution. If voters approve the amendment in January, a new owner of this three-bedroom home would pay about $1,700 a year in taxes instead of $4,500.

It's easy to understand how the proposed 'super homestead exemption' would help Veronica Greco sell her house.

But the face this house puts on the state's tax reform initiative is far from clear.

If the law is not changed next year, someone buying Greco's house would owe about seven times as much in property taxes as she does. That's because when a property is sold, its taxable value is reset near the new sales price.

The huge tax hit helps explain why the house is not selling, along with thousands like it across the state. Many potential buyers simply can't afford to move. It's clear something must change to help new homebuyers and get the state's economy moving again.

Another insight provided by the North B Street house is the impact of the Save Our Homes cap, approved by voters in the early 1990s to cap increases in a home's taxable value at 3 percent a year.

Because of the cap, Greco paid only $671 in property taxes last year. The generous shelter helps explain the broad lack of voter interest in how much tax revenue local governments have been collecting and spending. A big exemption for new homeowners would decrease inequities, but deeper changes are needed to make Florida's tax system fair and predictable for everyone.

The super-homestead amendment - which goes to the voters in January - gives homeowners a choice: keep the existing Save Our Homes cap or switch to the super exemption, which would shelter up to $195,000 of a home's taxable value without capping annual increases.

If Greco doesn't sell, she would be foolish to switch to the larger exemption . Indeed, if she loses the cap's protection and property values increase at their historic trend of 7 percent, switching to the super exemption could add $40,000 to her tax bill over 20 years, a sum far higher than government should extract from a middle-class house.

According to a new analysis by Property Appraiser Rob Turner's office, only about half of the homesteads in Hillsborough would choose to give up the tax cap and switch to the super exemption. Still, the switch would cost local governments $123 million in property tax revenue next year.

Hillsborough schools would lose $43.6 million, or about 7 percent. Yet the governor and legislative leaders say school budgets will not be cut. If that's so, who will make up the difference? No one knows, but owners of commercial property are getting nervous since they have neither a cap nor an exemption.

Such math is why polls haven't been favorable to the super exemption and why, no matter what voters decide in January, Florida's tax system will remain unfair and in need of reform.

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