Tax-cut short of 'doubling' homestead

If 60 percent of voters approve the four-pronged tax-cutting plan, the increased exemption would fall far short of doubling the value of the current $25,000 homestead exemption.

Sarasota Herald-Tribune
Published: Sunday, January 6, 2008 at 6:01 a.m.
Last Modified: Sunday, January 6, 2008 at 12:00 a.m.

TALLHASSEE - Among the promises made by proponents of the Jan. 29 referendum on cutting property taxes, one vow shines as a simple enticement to all homeowners.

"We have a chance to double the homestead exemption," Gov. Charlie Crist repeated in an e-mail last week, echoing what he and lawmakers have promoted as the centerpiece of the tax plan.

But that claim is wildly exaggerated.

If 60 percent of voters approve the four-pronged tax-cutting plan in three weeks, the increased exemption would fall far short of doubling the value of the current $25,000 homestead exemption. And when inflation is considered, the proposed increase would result in an exemption worth less than when it was created in 1980.

Rep. Jack Seiler, D-Wilton Manors, said telling Floridians that a "yes" vote will double the homestead exemption is the simplest way to promote a tax cut that most residents want.

"We're just trying to simplify it," he said. "If someone goes to the polls and truly thinks they're getting double, then they haven't been reading up on it."

But Rep. Kurt Kelly, R-Ocala, said his constituents are confused by the nuances of the "doubling" promise.

"That's not truthful," Kelly said. "If you're going to be honest you have to say there are some caveats. I'm afraid to say that in our sound bite mindset, people are trying to make simple what is in fact a complicated issue."

Like any tinkering of the tax system, nothing is as simple as it seems with the "doubling" of the homestead exemption, which would save the average homeowner about $240 per year.

About half of the projected $9 billion savings over five years if the Jan. 29 tax amendment is approved would come from the increase in the homestead exemption. The three other provisions in the amendment would allow residents to keep Save Our Homes savings if they move, create a new exemption for business equipment and cap big increases in taxes for businesses and non-residents.

Currently, the first $25,000 of a full-time resident's assessed value is exempt from taxes. The Jan. 29 ballot would increase that exemption by $25,000.

Sort of.

The increase would apply only to assessed values between $50,000 and $75,000. So an owner of a $50,000 home would see no benefit, though most Floridians own homes worth more than that and would get the full exemption. The provision was included to assuage concerns from rural counties that a true doubling would cripple their tax base. More critical was lawmakers' decision that the new $25,000 exemption would not apply to the nearly 40 percent of property taxes that goes toward education. It was a compromise aimed at deflecting criticism from schools and teachers. But those groups are still opposed to other components of the plan anyway.

The existing $25,000 homestead exemption reduces tax collections by about $2 billion per year. The proposed "doubling," due largely to the decision to spare education taxes, only provides about $900 million in new reductions - less than half of a true doubling.

Since 1934, Florida homeowners have had a homestead exemption. In 1980, it was increased to the current $25,000 amount.

Had that change increased at the rate of the consumer price index, the exemption would be worth $63,000 today, or more depending on the calculations.

So passage of the Jan. 29 amendment would still leave a homestead exemption worth less in real dollars than it did nearly 30 years ago. Sen. Mike Haridopolos, R-Melbourne, sponsored the bill that lawmakers approved in October. He said he supported automatic increases in the exemption to keep pace with inflation, but added there was not enough support to do that.

Haridopolos agreed the Jan. 29 vote would not truly double the exemption, but said any sizeable increase is welcome.

"This is a thing that polls well and for most people, it's common sense," he said. "If you want to pay more in taxes, vote no. If you want to give more money to government, vote no."

The general popularity of the idea in polls taken last year made inclusion of the homestead increase an obvious choice. Sen. Dan Webster, R-Orlando, said Crist and lawmakers surmised that including the homestead increase would help get the necessary 60 percent vote for passage of the amendment's more complicated proposals.

"It (the homestead increase) was something we felt could carry some of the load to get some of the other measures passed," Webster said.

Seiler said his talks with constituents have shown that Floridians feel entitled to the homestead exemption and embrace it warmly.

The increased exemption would only help those who, by benefit of the Save Our Homes limit on annual tax hikes, have already been shielded from tax increases caused by the real estate boon. Businesses and part-time residents get no benefit from the increased homestead exemption, though other parts of the amendment may help them.

Opponents of the plan say that increasing benefits to homeowners only hides the inequities and dampens political pressure to change them.

"If (homeowners are) saving money while their governments continue to spend wildly, they have no reason to re-engage in government to weigh in on how their tax dollars should be spent," said Dominic Calabro, president of business-backed Florida TaxWatch, in October.

Whatever the nuances, most lawmakers echo Crist's simple sentiment that Floridians are not going to vote against a tax cut.

"You're going to throw that cut away because it doesn't do enough? I doubt it," said Sen. Mike Bennett, R-Bradenton.

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