'Portability' aggravates tax disparity

Published: Sunday, January 20, 2008 at 6:01 a.m.
Last Modified: Sunday, January 20, 2008 at 12:36 a.m.

TALLAHASSEE - The title of a report that lawmakers received last year could have been "Why 'Save Our Homes' Stinks.''


More coverage to come


  • Today and Jan. 27, The Sun's Tallahassee bureau continues to examine the property tax-cut amendment that appears on the Jan. 29 ballot.Today: The ins an outs of "portability," its questionable constitutionality and the creation of a wider gulf between longtime Floridians and newcomers.Sunday, Jan. 27: Is the tax vote a referendum on Gov. Crist? Did lawmakers hurt themselves by pushing for a requirement that the amendment be approved by 60 percent of the voters?How portability worksThe so-called "portability'' included in the Jan. 29 property tax cut referendum would help those Floridians who have lived in the state the longest, as well as those who have lived in coastal areas where home values have escalated dramatically since their homes were purchased.

    Assume your home has a market value of $300,000 but the Save Our Homes cap of 3 percent on annual increases means you're paying taxes on an assessed value of $150,000.

    Under current law, if you move within Florida, you lose your Save Our Homes tax break and the 3 percent cap resets.

    Under Amendment One:If you move to a home of greater value - say $400,000 - you will keep the $150,000 in accrued Save Our Homes benefits, reducing your assessed value to $250,000. Homestead exemptions would also apply.If you move to a home of lesser value - for example a $200,000 home - you will keep the 50 percent in Save Our Homes benefits from your old home and your assessed value will be $100,000 before homestead exemptions are applied.The portability would apply to any move within the state. First-time homeowners in Florida, part-time residents and businesses would not benefit from the portability plan. It would retroactively apply to home purchases made in 2007.&
  • The 223-page review reinforced the fact that the 1992 constitutional amendment that caps property tax increases for full-time residents had achieved its goal of saving them money.

    But the cuts came, the report said, at the expense of creating "dissimilar tax burdens on homeowners in similar circumstances, based solely on length of ownership.''

    For example, someone who purchased a home in 2006 worth $150,000 pays about $190 per month in property taxes. Someone who bought the same home in 2001 pays less than half in taxes because of the Save Our Homes limit.

    The only leveling factor within the uneven system is that residents lose their tax advantage when they buy a new home.

    The report warned that allowing residents to keep their Save Our Homes savings if they move - dubbed "portability'' - would make the disparity worse and likely violate the U.S. Constitution by making disproportionate tax savings to longtime residents permanent.

    The report did not come from a partisan think tank. It was an $800,000 study requested by the Legislature from its own Office of Economic and Demographic Research and the state's Department of Revenue.

    Lawmakers ignored the report and chose to give voters the chance on Jan. 29 to allow residents portability of their Save Our Homes savings, a move that would enshrine deep tax cuts for longtime residents and cement their advantage over new homeowners and businesses forever.

    While acknowledging the system's flaws, few politicians can imagine getting the necessary 60 percent voter approval to limit Save Our Homes, or upsetting residents who love the tax break.

    Sen. Steve Geller, D-Hallandale Beach, said the odds of ending Save Our Homes are the same as voters choosing to institute an income tax.

    "Both of them have just as good as chance of passage, which is zero,'' said Geller, the Senate Democratic leader, who championed portability last year.

    Amendment One's biggest cheerleader, Gov. Charlie Crist, said there is no unfairness with portability.

    "I don't see a downside,'' he said. "I really do not.''

    The portability provision is one of four new tax breaks included in Amendment One, which needs 60 percent approval to change the constitution.

    The other three would increase the homestead exemption, create a new exemption for business equipment and impose a soft limit on assessment increases for businesses and part-timer residents.House Minority Leader Dan Gelber, D-Miami Beach, compared portability to a "pyramid scheme.''

    "You're in early, you get the best tax rates. You're in late, you pay for everyone else's services,'' said Gelber.

    But Geller said the housing boom between 2001 and 2005 made it impossible for many Floridians to move since the taxes, based on a home's value, would be too much to afford.

    "I was getting complaints from people who said, 'Look, my taxes are great today but I can't move,' '' Geller said.

    Portability also will come at a cost to school districts and local governments of about $3.8 billion over the next five years in lost tax revenue, with $1.1 billion of that coming from school funding.

    Crist said portability is the most critical part of the Jan. 29 amendment, repeating his belief that it will "refire'' the state's economy by allowing more Floridians to move and resurrect the critical real estate market.

    But most economists have said the move will do little to affect an economy the size of Florida's.

    "I think it will increase some real estate transactions,'' said Sean Snaith, an economics professor at the University of Central Florida. "Is it a panacea to solve the woes in the housing market? No way.''

    Snaith wrote a colorful report last month that said portability will create a permanent second-class tier of citizens who will always pay more taxes than longtime Floridians."What if the federal government implemented a similar benefit for income tax based on when your ancestors arrived in the country? If your family tree has deeper roots, you pay a lower tax than if you are a first-generation American,'' he wrote. "Somehow we are doing the equivalent with the portability of Save Our Homes and I can't believe that if it passed on Jan. 29 that it would survive a challenge in the courts.''

    That argument is not just conjecture.

    Last year a group of Alabama residents sued the state, saying Save Our Homes violated the Constitution by taxing their part-time houses in the Panhandle at a much higher rate than residents.

    The suit was tossed by a judge but has been appealed. One of the Alabama residents' attorneys, William Owen, has followed with another lawsuit that includes Floridians who recently purchased homes. Owen said passage of Amendment One would make his legal argument stronger.

    Some supporters of the plan say it was worth the chance.

    "This version has only a 50-50 chance of being constitutional,'' said Geller. "But it's a crisis."

    Crist said he has legal opinions backing up the constitutionality of portability and, as usual, seems optimistic and unconcerned about a court fight.

    "I think it's going to stand judicial muster,'' he said last week.

    Some lawmakers wonder if the amendment may have been intentionally designed to end Save Our Homes.

    A separate tax amendment that would have phased out Save Our Homes was drawn up by the Senate and approved by lawmakers in June, but later the proposal was tossed off the ballot for unconstitutionally vague language.

    "I don't know if it was intentional or not, but you've had senators who said they wanted to get rid of Save Our Homes,'' said Rep. Ron Saunders, D-Key West. "If this amendment passes on the 29th, this could endanger your Save Our Homes cap.''

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