It is Election Season, and we will be voting on a lot of different things this cycle. Although Election Day is not until November 6th, people who requested mail ballots should have them by October 10th, with early in-person voting beginning in Broward on October 22nd.
You may be thinking, “You’re the Real Estate Geek. What does that have to do with the election?” Quite a bit this year, as it turns out. There will be some measures on everyone’s ballot that directly affect real estate here in Florida – pertaining to taxation.
I take the title of this column from a famous saying of the late Senator Russell Long of Louisiana. Long was chairman of the Senate Finance Committee, which plays a large role in determining tax policy in the US. Lobbyists would come into the Senate offices, seeking tax breaks for their clients – what they would call “technical adjustments”. In response, Long would often say, “Don’t tax you, and don’t tax me. Tax that guy behind the tree!”
Taxes have never been popular. One of the earliest rallying cries in our Colonial era was “Taxation without representation is tyranny!”, after all. Having lived in Florida five years now, it is clear many here in the Sunshine State have a particularly strong aversion to taxes.
Well on our ballots this year (probably on the back of page 1) there will be two constitutional amendments that affect the way we tax real estate in Florida.
Amendment One, if passed (and constitutional amendments require a 60 percent yes vote to be adopted, a high hurdle), would increase by up to $25,000 the value of an owner-occupied property that is exempt from taxation.
In Florida, a substantial amount of the funds used to operate our schools, as well as the various city and county governments, come from direct taxation of real estate. The tax rate (often called the millage or “mil” rate) varies by city. In Broward County, the combined mil rates (school, city and county) range from 1.56% of property value in Weston, up to 2.39% in Lauderdale Lakes. So you multiply the percentage for your city by the tax value of your property. That tax value is the assessed value minus the exempt amount (if you are an owner occupant).
I participate in local city commission candidate screenings with the Realtor board. Several of the candidates we screened are very concerned about Question 1. If you increase the amount that is excluded from taxation, that will decrease available funds to the city and county. To rectify that, they would either have to cut spending or raise the mil rate. And neither politicians nor the voters like to hear that the mil rate is going up!
Which brings us to Question 2. This proposed amendment affects non-owner occupied properties (second homes, investment and commercial properties), and would set a maximum increase in assessed value of 10 percent per year, permanently. In 2008, the state enacted this 10-percent cap, but only for 10 years. Without this amendment, the cap would terminate at year-end 2018.
Full disclosure – I am (at least for the time being) a state director of the Florida Association of Realtors, and as an entity we have not only taken a position strongly in favor of this amendment, but also are funding the campaign for it to a significant degree. The fear is that if the cap is removed, local officials could view increasing taxes on non-owner occupied property as an opportunity to raise revenue without disturbing local residents and homeowners. “Oh they’re just people ‘from away’.” “Oh they are rich investors and won’t miss the money, and besides they won’t be yelling at us in Publix every week. Or voting next election.”
Well there are many people who own vacation or retirement homes here. Do we really want people to sell them all at once? Do we want businesses to pass these costs on to consumers, or relocate? Well those are the main arguments in favor of passage.
But the money needed to fund our schools and needed infrastructure has to come from somewhere. Unlike the Federal Government, we don’t have the option of printing it. So, directly or indirectly, these two measures affect everyone. In other words, we are all behind a tree. Are you behind a redwood, or a bonsai?