Snowbirds’ Florida Tax Crisis

Spring 2008 CSANews Issue 66  |  Posted date : May 24, 2008.Back to list

Last summer, you read here about how Florida's property tax system was rigged against snowbirds. You'll recall that the Save-Our-Homes Amendment (SOH), introduced in Florida in the 90s to protect (homesteaded) seniors on fixed incomes from losing their homes, resulted in the exact opposite effect on seasonal-resident property-owning seniors. Property taxes levied on out-of-staters have risen to a discriminatory 3-10 times or greater than those paid by many of their homesteaded neighbours (some of whom actually pay little or no property taxes on lower-priced homes). The greatest beneficiaries of the Save-Our-Homes Amendment are some of the wealthiest longtime Florida residents, who have locked in tens of thousands of dollars in tax savings per year as a result of SOH. Since 2001, the unchecked growth in city and county expenditures was a natural outcome of homesteaded voters with taxes essentially capped, having little incentive to rein in the spendthrift politicians. Snowbirds paid the shot, with their property taxes doubling or tripling in five years.

You'd think that, given all the talk and effort, some progress has been made to ameliorate the situation over the past year? Well, you'd be wrong! The situation has actually deteriorated.

It's a rare day that there is not an editorial or op-ed, an article or a letter to the editor in the Florida papers that does not talk about some aspect of tax reduction or reform.

It's a rare day when the legislature was sitting over the past year, when property tax was not uppermost on the agenda or on the lips of Florida's senators or representatives.

And that is just the talk. Property tax 'reform'-related activities are a year-round contact sport in Florida. Snowbirds, so far, are the ones who get continuously slammed into the boards. There was also action:

On the legislative front, Amendment 1 was placed on the ballot last January 29 (after last year's Super-Exemption proposal was thrown out by the courts) and on that Black Tuesday, was passed by 64% of the voters. Amendment 1, called by the Palm Beach Post, "Unneeded tax relief, not serious tax reform," brings the following benefits to homesteaders: (1) doubling the homestead exemption from $25,000 to $50,000, thus heaping additional benefit on the already advantaged (voting) homesteaders (further off-loading hundreds of dollars per year from them onto...guess who...non-homesteaded part-time seniors, rental owners, businesses and even homestead-eligible first-time homebuyers), (2) "portability," allowing homesteaders' accumulated Save-Our-Homes (SOH) benefits to be ported when moving to a new property (entrenching discriminatory tax advantages of longtime homesteaders, at the expense of homestead-eligible first-time buyers, recently homesteaded property owners and renters). For snowbirds, it means a ridiculous 10% cap on property assessment increases for non-homestead properties (a joke in Florida's real estate market where property values are in free-fall). The net benefit was supposed to have saved about $250 per property owner. Well, with the drop in real estate values across the state, this property assessment value cap proved to be useless. This is a clear example of how nothing has changed in Florida. Those who vote continue to shaft the out-of-staters who don't!

Also on the legislative front, Florida's Taxation and Budget Reform Committee (TBRC) is empowered to place amendments to be voted on by Florida's taxpayers at November's ballot. The TBRC has given its preliminary approval to a proposal to replace the bulk of the school portion ($8B) of property taxes with a 1% increase in sales tax (about $4B), with the shortfall to be made up by state budget reallocations and removal of some sales tax exemptions. They are continuing their deliberations and may place other amendments on the upcoming ballot. I will not venture a guess regarding how Florida's voters will respond but, while this proposal will not achieve equity, if passed, it will result in a reduction of about 30% on the property tax bill for most property owners.

The property price swoon of about 25-30% ended up to be the direction-setter of snowbird property taxes for this year. Using flat mil rates, some non-homesteaded snowbirds had reductions of 25%, whereas some homesteaded Floridians had actual slight tax increases. Florida's outrageous property tax system is a direct contributor to the dramatic and continuing drop in property values. Every time a potential buyer considers a purchase, every $3,000 in discriminatory taxes reduced his ability to buy by $50,000 (assuming a mortgage rate of 6%). Just as the northern boomers are starting to look at retirement properties in the sun, Florida is driving them to other southern states.

On the legal front, in addition to last year's Alabamans' non-homesteader class action suit challenging the constitutionality of Save-Our-Homes, two other cases have been launched. An individual constitutional challenge was launched in federal court by an Illinois resident and another class action was initiated by recently homesteaded Floridians, who also pay discriminatory taxes as compared to earlier homesteaded residents. All of these cases are winding their way through the courts or are in appeal.

Tax reform groups have not been sitting on their hands either. Cut Property Taxes Now has collected more than 150,000 signatures to place an amendment on the November 2008 ballot to put a 1.35% cap on property taxes. Unfortunately, the requirement was for 611,000 signatures by last January to get it on the ballot without going through the legislature. Nevertheless, the power of the 150,000 signatures is being used to influence the legislators, who could still place the amendment on the November ballot.

There are proposals to cut/cap spending and/or taxes. Some will settle for "Same Value - Same Taxes," while others believe that the part-time resident (non-homesteaded seasonal) should pay less than full-time resident homesteader, since they use only part of the services and for only part of the year. To me, the long-overdue bottom line is about getting equal treatment in Florida! Until that happens, I won't be recommending to anyone to buy there. It was Winston Churchill who said, "The Americans will always do the right thing, once they exhausted all other options." But this is Florida. I guess time will tell.

Related links
Peter Benedek's Website