Monday, August 14, 2006

A Tale of 2 Taxpayers

The "Save Our Homes" tax system is creating a 2-tiered hierarchy where one homeowner can be paying 3-4 times the property taxes than another with an identical house in the same neighborhood.

From an excellent article in the Palm Beach Post, a few months back...

"Save Our Homes, the tax relief package aimed at keeping Floridians of moderate means from being taxed out of their houses, increasingly divides Florida property owners into two classes — winners and losers."

If you purchased within the last 3 years, you're most likely in the "loser" category.

"The winners? Longtime property owners with homestead exemptions.

The losers? Everyone else, from recent buyers of homes to apartment tenants, from snowbirds to owners of malls and office buildings, even longtime residents like Matthew Krische who simply move a few miles away."

Why the "fuzzy math" on taxation? Read on....

"The amendment to Florida's constitution [1992] says the taxable value of a homesteaded property can rise by no more than 3 percent a year or the rate of inflation, whichever is less.

Throughout the '90s, Save Our Homes didn't matter much. After all, houses were appreciating by only a few percent a year.

But as home prices have skyrocketed in the past five years, so has the gap between the taxable value and the true value of many homes. "

It really is a "smoking deal" for those who got in early, and a real bummer for everyone else (out of staters, investors, first-time buyers).

"When one homeowner pays two or three or four times as much as a neighbor in a similar home, questions of fairness follow."

Of course, its not quite "taxation without representation". Just "unequal taxation with representation". Sorry, you're not a member of our "Clique" (moved here prior to 2003) - you pay more. A LOT more.

"'Nobody ever said it was fair,' said Ken Wilkinson, the Lee County property appraiser and Palm Beach County native who pushed for its passage. 'The inequity it fixed was far greater than the one it created.'"

Okay, at least he's being brutally hones with his first statement. However, the second statement makes it (to be brutally honest) obvious that this guy is an untruthful sack of you-know-what. When one resident pays triple the taxes of his neighbor in an identical residence, you've got a SERIOUS issue. The inequity is much, much worse.

Still, you've got to admit, it's in Florida's DNA. I just wish they'd spell it out directly in the constitution, so that people wouldn't get confused in the future. It would go something like this:

Article 1. All legislation must be written in a way to maximize SUBSIDIES TO THE GEEZERS.
Article 1a. They deserve FREE MONEY.
Article 1b. Everyone else must pay to support this.
Article 1c. Get used to it.

Really now, it's all a ruse. When the law was proposed, that was the justification:

"Save Grandma's House! She's gonna lose it because taxes are SKYROCKETING! The sky is falling! The sky is falling! Save Grandma's House!".

In actuality, it was people like Wilkinson, Greg Norman, Rush Limbaugh, and Malcom Glazer that are the biggest beneficiaries of being "saved" from losing their homes. Talk about strange bedfellows.

"Save Our Homes also has evolved into a regressive tax where the biggest benefits accrue to the wealthy. Golfer Greg Norman, Tampa Bay Buccaneers owner Malcolm Glazer, singer Jimmy Buffett, broadcaster Rush Limbaugh, even former Tyco International head Dennis Kozlowski, among other longtime owners of oceanfront manses, see millions in property value sheltered from taxes. All saved more than $100,000 in property taxes last year thanks to Save Our Homes.

Yet there's no such break for cash-strapped first-time buyers who struggle to find homes they can afford. They pay taxes on the full value of their homes, posing one more obstacle to affordable housing."

But there is hope. Really.

"State Rep. Fred Brummer, R-Apopka, is an ardent tax cutter but has been an outspoken opponent of expanding Save Our Homes. Not only does the break shift the tax burden from the wealthy to everyone else, it also puts less affluent inland counties at the mercy of wealthy coastal counties such as Palm Beach, Brummer said.

When he introduced a property-tax reform plan in Tallahassee last month, Brummer specifically pointed to Norman's outsized tax break.

'Because the appreciation is so much greater in the coastal counties, the coastal counties have a far greater percentage of their property protected under Save Our Homes,' Brummer said. 'The wealthy homeowners are not paying their full share.'"

Now, the whole thing is actually having a "reverse effect" on the housing boom. Just another reason to be very, very careful where and what you buy.

"During a recent tour of Nettles Island in his yellow golf cart, McIntosh pointed to for sale signs and said high property tax bills have made lots difficult to sell.

'When people are told what the tax bill will be,' he said, 'they burn rubber getting out of here.'"


Full article: 2 classes of homeowner

12 comments:

davenjax said...

Fine writeup - though aren't you being a little harsh on the older generation?

(Not that there's anything wrong with that!)

zippo said...

What happens when the tax assessors start reducing the values of the homes? New (overpaying) homeowners would get a break, right?

dutch_master said...

Yep, if their assessed value decreases, so would their taxes, theoretically.

The old-time homeowners (under-payers) would still be increased by 3% a year until they caught up. This would never happend, but that's how it would work, assuming no changes to the current law.

Hope this helps....

last_year said...

I forecast changes to the law. As soon as revenues start dropping, it'll happen very quickly, indeed.

confused said...

Glad I found your site! I have been a bubble sitter for the past few years. Never intended to be that but when I first tried to buy a unit in the building I live (grand view palace north bay village) I thought the units were overprices at $200K + , now units are being sold at over $300k and that means that even with a $100 k down payment I priced myself out the market TWICE!! One time because of the mortgage I will need to pay on the additional $100K but also the 2.5% additional taxes I will need to pay on that $100K as well. I thought I was the only one who had waited but I speak to a number of people and there is a panic going on here which is pretty sad. Those of us who did not buy can not possibly afford a home now anymore and rents are going up. I would hate to leave FLorida. I know I made a HUGE mistake by not buying a few years back and the feelings of guilt and worry are hard to shake.I am a hard working mom of a 9 year old and with a good job ($40K a year) and savings I feel poor.

FL - Paradise Lost said...

Confused,
I totally understand - this market is in a very bad state right now, and the realtors are doing their absolute best to keep the public from knowing that. This site is dedicated to the truth, and for the time-being in Florida, the truth is this:

It is a very, very bad time to purchase real estate.

The only way you're going to get a decent deal right now is buying a foreclosure - which is a whole other topic (though I may do some talking on that very subject at a future time - especially as the foreclosure rates keep climbing).

Anonymous said...

We were seriously considering relocating to South Florida to be near family but the property taxes and the insurance alone are more than our whole mortgage payment in New York. Combine that with a wage cut of 50%, and, sadly, we have to continue to bond with family via phone.

zippo said...

Anon, sorry to hear of your situation - there are plenty of others with similar stories. Florida was once a very cheap place to live, and now its pretty screwed up.

Stay tuned - it will get better.

Brent McD. said...

Many thanks for this article. I had no idea such a tax system existed anywhere but California. We have something called Proposition 13 out here which has been called the "third rail" of California politics. But the law has had the same effect as what you describe -- if not much worse -- and desperately needs reform. Local governments in California are starved for funds, and neighboring homeowners pay vastly different taxes, based only on when their property was purchased. Commercial real estate has gotten a free ride too, since it doesn't change hands as often. Look it up, and prepare yourself to be amazed

Anonymous said...

No, no, no - the most pernicious effect of the Save Our Homes amendment is to insulate longterm homeowners from what their local officials are doing - that is spending so much that drunken sailors look conservative! Unlike California, Florida's SOH applies only to homesteaded househouses, that is, residents - not rental property, not businesses and not snowbirds (Canadian and northern folks who spend winters here). These people are being crushed! This is behind most condo conversions, here and is killing small businesses.
See also "portability" - very popular among populist politicians of both parties - allows you to take your tax savings with you when you sell your home.

Anonymous said...

No, no, no - the most pernicious effect of the Save Our Homes amendment is to insulate longterm homeowners from what their local officials are doing - that is spending so much that drunken sailors look conservative! Unlike California, Florida's SOH applies only to homesteaded househouses, that is, residents - not rental property, not businesses and not snowbirds (Canadian and northern folks who spend winters here). These people are being crushed! This is behind most condo conversions, here and is killing small businesses.
See also "portability" - very popular among populist politicians of both parties - allows you to take your tax savings with you when you sell your home.

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