Property-tax tweaks won't bring equity

Florida lawmakers again refused to try to fix major flaws in how property is taxed in this state. Instead they are offering voters next year a chance to reduce a small part of the inequity for targeted taxpayers.

The Legislature is offering a constitutional amendment for voter approval in 2010 that would give a tax incentive to people who haven't owned a home in eight years. Don't ask where the eight years comes from; it's arbitrary.

It means that a qualified buyer of a full-time residence next year would get an extra property-tax exemption of 25 percent of the home's value. The break phases out over five years.

The same measure would cap increases in the taxable value of businesses, apartments and other property not eligible for a homestead exemption to 5 percent a year (down from 10), except for school taxes. The increase in the taxable value of homesteads has long been capped at 3 percent a year.

There's no need to decide now how you'll vote in 18 months, but it's not too early to think about how these nips and tucks do nothing to improve the ugly asymmetry of Florida's tax structure.

Longtime homeowners will still enjoy huge tax savings over both new homeowners and business owners, and the tax burden will continue to gradually shift to business. As soon as the economy recovers, tax unfairness will again be an expanding characteristic of the Florida economy.

New businesses and businesses that change locations will face an increasingly high tax penalty. The new law, like the Save Our Homes Amendment on which it is based, will force future legislators to wrangle over how to fix it or work around it.

Of more immediate interest to most voters is the tax break proposed for new property owners. The driving motivation behind this superficial change is to stimulate home buying. If it does encourage sales, it could give some help to everyone with property on the market.

"It's going to turn renters into buyers," says Rep. Carl Domino of Jupiter, one of the amendment's sponsors.

We're less optimistic. Buyers of new homes could save $1,500 or more, but actual savings for most buyers will be much less. The median sales price of a home in the Tampa area is $135,300. Buy that house, and your tax would be about $2,050. But if it's your first house in eight years, the tax would be reduced to $1,313 in the first year.

The logic of helping new buyers is based on the wrong assumption that anyone who owns a house is better off financially than anyone who does not. The median price of a single-family home in Tampa has dropped 27 percent since this time last year, so if you bought last year, you could easily be out $50,000 and wish you had kept renting.

As a financial incentive, the tax break is insignificant. And because the break phases out, it's a gimmick and not a solution to the problem of wildly different tax rates for owners of identical properties.

Its best justification is that the law would reduce for a few years the tax penalty on new buyers. Consider how the change would apply to four identical homes, each worth $200,000, on the same Tampa street.

In this simplified scenario, home A was bought last year by a retiree from Ohio for $200,000. His taxes are $3,456 a year, using 2008 tax rates. If he only winters here and maintains his permanent address up north, his Florida taxes would be 26 percent higher.

Home B was bought 25 years ago by an owner who benefited from the Save Our Homes tax cap. Her taxes are $1,281 a year. Home C is being bought by another longtime Florida resident who used the new portability feature to transfer a big tax cap from his old home to the new one. His taxes also will be $1,281.

Home D is being bought by newlyweds who have never owned a home. The new amendment would lower their taxes from $3,456 to $2,368 the first year. After five years, they'll pay the same amount as the owner of home A.

Rep. Domino and others are already talking about tinkering with the proposed change. He wants to give the break to anyone who hasn't owned a homestead in Florida, even if they own a home now in, say, Ohio.

Creating special exemptions designed to lure selected buyers is a shortsighted strategy, especially when the tax burden is being shifted to job-creating businesses. The state's growth-addicted economy has been nationally ridiculed for having characteristics of a Ponzi scheme. The way to improve Florida's reputation and appeal to the upcoming surge of retiring baby boomers is to offer them a fair, simple and predictable taxing system, not a teaser rate and a confusing array of vanishing discounts.

The inequities that exist on every street reflect the need for basic reforms. A recent arrival is still so unfairly overtaxed that you can't blame him for thinking about moving back to Ohio.