Raising the homestead exemption has ill consequences – for your neighborhood
Normally, count us all in when the subject of cutting taxes arises. It’s a no-brainer when anyone in Washington proposes cutting federal tax rates — be it the personal income tax rate, payroll tax rate, estate tax rate, corporate income tax rate, dividend tax rate or capital gains tax rate. Cut them all!
We would take anything that would allow Americans to keep more of what is theirs and what they earned, rather than have it confiscated and sent into the federal abyss.
But at the same time, we’re not all in on a proposed Florida constitutional amendment that would cut property taxes for homesteaded property owners by raising Florida’s homestead exemption from $50,000 to $75,000.
Let’s talk taxes.
Just before this year’s legislative session began, Florida House Speaker Richard Corcoran spoke to an audience of CEOs and elected officials.
Afterward, one of the mayors in the audience remarked that Corcoran left the impression that municipalities were lucky to be able to exist and should be grateful to the Legislature.
Another way to put it, and it often appears this way: Lawmakers have disdain for county and municipal governments — especially when it comes to the idea of home rule.
Two instances: No. 1) The Legislature’s continued meddling in counties’ and municipalities’ regulation of vacation rentals; and No. 2) Putting on the state ballot a constitutional amendment proposing to raise the homestead exemption from $50,000 to $75,000.
On the surface, if you’re a homesteaded property owner, your inclination is to say “Yes!” — raise the exemption, because it would lower your annual property taxes. It’s instinct: Everyone wants to pay less in taxes.
And while that is always our inclination as well, there are some particular consequences to this that are likely to have adverse effects on the quality of life in every Florida city, county — and by extension perhaps even your neighborhood.
Whenever the amount exempted from your property taxes is increased, there is a corresponding reduction in your city and county’s general revenues.
This is the primary source of revenue that pays for everything your local government does — police and fire protection, street and sewer maintenance, water, parks, you name it.
And to be sure, we all believe every government entity can be more efficient.
But talk to any mayor, city manager or county commissioner in Florida, and they all will tell you one of the most pressing challenges they face is delivering the services taxpayers expect with the revenue sources in their control.
Everything is a trade-off. If local taxpayers want more, someone must pay. And the choices to fund services locally are limited: raising your property-tax millage rate; increasing (within state limits) your city or county’s sales tax, a portion of which always goes to the state; or increasing fees for services.
But when the Legislature orchestrates an increase in the homestead exemption, essentially you have state lawmakers telling city and county governments: “We’ve decided you’re operating inefficiently, so we’re going to cut your tax revenue.”
While state lawmakers tell their constituents at election time how they fought to lower your taxes, local governments are stuck with the consequences — raising your millage rate or cutting services.
What’s more, the ill-consequences of increasing the homestead exemption are compounded. As the late Milton Friedman often said about taxation and subsidies: What you give to one, you must take from another.
Pure and simple, the homestead exemption is a subsidy to year-round homeowners.
What you give to them in lower taxes means local governments must take more from someone else. In fact, that exists today: The homestead exemption means that every second-home owner and every commercial building owner (office, warehouse, rental apartments) is paying more than he otherwise would to subsidize full-time resident homeowners.
How fair is this: A part-time resident homeowner pays more for local police and fire services than does a year-round resident homeowner — even though he consumes far less in services?
When the $75,000 homestead exemption question shows up on the 2018 statewide ballot, you can bet the city and county elected officials will be advocating against it, sounding like they’re progressive tax and spenders. At the same time, unfortunately, many voters will be oblivious to the consequences — other than paying lower property taxes.
If state lawmakers want to be tax-cutting heroes, they might try focusing on their own sandbox.
Over the past three years, Florida’s budget has risen from $80 billion to $83 billion. You know there is excess spending in there.
Potential Duval fallout
According to Duval County Property Appraiser Jerry Holland, if voters approve the increase in homestead exemption expected to be on the November 2018 ballot, the maximum additional relief to a homesteaded property in Jacksonville at current millage rates would be $294.26 if the home is valued at $125,000 or more. The total reduction in revenue for the city beginning in 2019-20, based on the current tax roll, would be $25,798,062.14.
To put that loss of revenue in perspective, here are some examples of what about $26 million would pay for, based on the 2016-17 general fund budget:
• Build six new fire and rescue stations
• Replace the Dallas Graham and Brentwood public libraries, renovate the Beaches library and build a library in Oceanway
• Cover the operating expenses for one year for the Baseball Grounds of Jacksonville, EverBank Field, Prime Osborn Convention Center, the Ritz Theatre, Times-Union Center for the Performing Arts and Veterans Memorial Arena
• More than double the budget for the Jacksonville Children’s Commission
• Double the countywide parks and recreation projects budget
• More than double city funding for nonprofit agencies
• Put more than 200 additional police officers on the Jacksonville Sheriff’s Office roster — including vehicles, tuition, computers, radios, uniforms/equipment, salary and benefits.