Snowbirds' Florida Tax Crisis

Summer 2007 CSANews Issue 63  |  Posted date : Aug 07, 2007.Back to list

Peter Benedek (RetirementAction.com). It's been called loony, outrageous, two-tier, discriminatory, confiscatory and worse. The bottom line is that Florida has a property tax system that is rigged against snowbirds and it is taxing many out of the homes for which they saved their entire working lives. If you are a property owner in Florida or are thinking of becoming one, read on to learn:
  • how "good intentions" got us snowbirds carrying a disproportionate share of Florida's tax load
  • how a flawed property tax system is about to be replaced by another flawed one
  • why the out-of-control spending in Florida's counties/municipalities has been left unchecked by voters
  • possible actions that you may take to change the discriminatory tax system in Florida
How did we get here?
In the early 90s, a Florida constitutional amendment was passed, allegedly to prevent seniors and low-income residents from losing their homes due to property tax increases resulting from rising real estate prices. The Save-Our-Homes (SOH) amendment essentially capped annual increases to the property tax valuations of homesteaders' residences at 3% or inflation, whichever is lower.

In the meantime, non-homesteaders' taxable valuation base started increasing rapidly in tandem with the rising Florida real estate values between 2001 and 2006. The result was a steady shift of the tax burden from homesteaders to non-homesteaders. While the property tax inequities affected some homesteaders as well (e.g. first-time home buyers, those wishing to move to larger homes in order to accommodate growing families and businesses/investors who are not eligible for SOH), the majority of the voters were/are largely desensitized to government spending increases as their taxes were effectively capped. With voters having no incentive to rein in the free-spending politicians, municipal and county spending started growing at 15-20% per year, leading to 20-25% annual increases in snowbirds' tax bills (mine tripled in five years). By the end of 2006, snowbirds were routinely paying three to 10 times the taxes of their homesteaded neighbours in identical condos.

Last November, the CSA tabled Canadian snowbirds' concerns to the Florida Tax Reform Commission. They identified the culprit to be the assessments and suggested a return to say, the year 2000 baseline, when valuations were less discriminatory and then "assessments would be allowed to increase by only a limited amount each year, probably in the range of 5%, or on the basis of the increase in the consumer price index plus a small amount to permit development." This was a very logical and reasonable proposal. However, as you have noticed by now, logic and reason don't seem to have much to do with property taxes in Florida.

Legislators in Tallahassee struggled with property tax reform legislation during this spring but, being unable to agree on how to proceed, a special session was called for June. The much-awaited 10-day special session came to a conclusion within three days with hardly any substantive discussion or debate. The taxes that were to "drop like a rock," according to Governor Crist, did so for homesteaders, but may end up crushing snowbirds.

What was needed is rollback of county and municipal expenditures to a level consistent with inflation and growth. What we got is possibly an average of 7% reduction per taxpayer for one year. I say possibly, since politicians were given an "override" vote and some counties' property appraisers already declared property values increased by 5% for the coming tax year. Of course, any real or imaginary property value increases in excess of inflation translate into changes in assessed property values for non-homesteaders only, which means that an additional portion of the expenditures is being shifted to snowbirds (businesses and renters).

What was needed is "Same Value - Same Taxes." What we got instead is "super-exemption" to further increase the benefits to the already much-advantaged homesteaders. The "super-exemption" is a 75% exemption on the first $200,000 valuation and another 15% exemption on the next $300,000 valuation; and, to top it all off, if your old SOH valuation is more advantageous, then you are welcome to keep it. If this "super-exemption" passes in the next January constitutional vote, the result will be to further offload Florida's spending onto the part-time owner-resident snowbirds in future years, unless it is matched by corresponding cuts in expenditures. What we'll end up with is many snowbirds being forced to sell in a market of falling prices, when they can no longer afford to pay their taxes. Some who can afford to pay may grin and bear it, while others who can will become homesteaders (not a widely available or preferable option for Canadians and other foreigners). Still others, even if they can afford it, will decide that they're no longer willing to take it and just move to other southern states that still welcome snowbirds.

But the most significant, in fact the root cause of the current Florida property tax mess, is that the usual control which voters exercise on free-spending politicians (i.e. that they can vote them out) does not apply in Florida. The vast majority of voters, being homesteaders, are unaffected by expenditure increases. This open-loop system remains essentially unchanged and will likely lead to continuous out-of-control spending and corresponding financial devastation for many snowbirds.

Diane Francis, in her May 4, 2007 article in the National Post entitled "Snowbirds getting angry, organized" concludes that, "The taxes imposed on seasonal residents have helped finance the state's infrastructure costs and avert a state personal income tax. Snowbirds don't vote, which makes the unfair taxes politically desirable."

And sure enough, Florida's TaxWatch president Dominic Calabro was recently quoted as saying that "Florida's tax burden is 36th among states as a percentage of personal income, but the state has the fourth-highest percentage of total revenue provided by local governments." That is, the state has offloaded a significant portion of the load onto local government. But what was omitted is that Florida's homesteaders (the vast majority of Florida's voters) are paying only 32% of the property taxes, yet they own 49% of the market value. This in effect ensures that an even-larger portion of an already crushing tax load is borne by the non-homesteaded snowbirds and businesses.

The only way in which the gap between homesteaders' and snowbirds' property taxes may be somewhat reduced is if real estate prices drop significantly from last year's peak and next January's constitutional amendment is rejected; because, as snowbirds' taxable values drop with market values, homesteaders' could still increase by up to 3% per year. All other scenarios lead to an aggravated situation for snowbirds.

So where do we go from here?
Floridians have the right to allow their governments to increase annual spending levels at 15-20%, as they have done in the past. Whether they have the right to discriminate against out-of-staters is being tested by four Alabamans who are suing the state, the governor, etc. on constitutional grounds. Are there other legal angles that can be used to challenge the Florida property tax system?

Snowbirds also have the right to vote with their feet. Those who already in Florida may leave and those who are considering buying winter property will evaluate options in AZ, SC, NC, etc. As for American snowbirds, Dory Kilburn, leader of the Boynton Intracoastal Group, warns that "the tax savings are a powerful incentive for non-homesteaded winter residents to become homesteaded. This is happening already because of escalating taxes. Foreign and second property owners will escape 'tax bankruptcy' by selling to the homesteaded. The non-homesteaded population will rapidly decline, along with Florida's tax revenue. Businesses will become the predominant taxpayers and Florida's fragile economy may collapse."

We need help from the Canadian government to counter the two-tier discriminatory property tax system in Florida. You can contact your MP or the PM to see if they can:
  1. Table an official protest against the discriminatory treatment of Canadians.
  2. Study NAFTA and Canada/U.S. Tax Treaty for possible violation of these treaties.
  3. If discriminatory taxation is not a violation under #2, then future treaty changes should consider making it a violation.
  4. Collect up-to-date statistics on the benefits that Canadian visitors to Florida bring to the state, and lobby U.S. federal and Florida state governments.
  5. Introduce an equally discriminatory property tax regime in Canada for American property owners and, possibly, create a tax loophole for Canadians who are being taken advantage of in Florida.
If you are a member of the AARP, you should contact their national (not Florida) office to ask them why they have been silent on this discriminatory property tax issue; this is not a Florida issue, but a national one affecting Americans (and Canadians) from every state (and province). If you don't get satisfactory answers, you should press them for immediate action now.

I have no doubt that many of you will have lots of new ideas regarding how to tackle this problem. Get up to speed and get involved. You can contact one of the leaders in an area near your Florida home. You can read up at their websites and/or join one of the many organizations which are tax-reform advocates in Florida. Contact info for a sample of the growing list follows:

  • Dory Kilburn at dorja@falls.igs.net (South Palm Beach County)
  • Winnie Nelon at h.a.r.tax@comcast.net and www.cartonline.org. (Manatee County)
  • Frank MacNeil www.comffret.com (North Palm Beach County)
  • David McKalip of www.cuttaxesnow.com (Pinellas County)
  • Bill Levison of www.browact.org (Broward County)