According to the Martin County Property Appraiser’s website (https://www.pa.martin.fl.us/), there are 16. They encompass reasons as varied as being a Florida resident to a limited-income Florida senior or a disabled vet. Government largess at its finest but is it to the detriment of a fair and equitable system of taxation.

In the past few years, the number of exemptions has increased exponentially as the legislature has tried to curry favor with the voters. For Tallahassee, this is a way to gain political points as tax cutters but not have to suffer any pain with the loss of tax dollars to state coffers. Real estate taxes are local taxes that are levied by local governments for local needs.

The oldest exemption is the “Homestead Exemption,” which dates to 1934. It was meant to shield individuals from losing their property during the Great Depression. It was initially on the first $5000 of property value. It was increased by statute in the 1960s to $10,000 and then, in 1980, was raised to $25,000 by a voter-approved Constitutional Amendment. That amount was increased to $50,000 in 2008 for non-school property taxes.

These exemptions are not to be confused with the “Save Our Homes” Amendment that was passed by the voters in 1992 and went into effect in 1995. That amendment states that the year after you receive your Homestead Exemption, your property assessment can only be raised by the lesser amount of 3% per year or the rate of inflation. As an example, if your home was assessed at $100,000 in year one, the most it can increase would be to $103,000 in year two.

In 2008 voters approved a Constitutional Amendment that allowed for portability of the “Save Our Homes Amendment” caps to a new home bought anywhere within the state. This allows you to bring an assessment of up to $500,000 with you and have it part of the calculation in figuring the valuation for your new home.

Using the Martin County Appraiser’s estimator, I ran several scenarios. One was a Market Value of $100,00 in the old home with an Assessed Value of $90,000. The new property’s sale price was $200,000. After applying the Portability benefits and Homestead Exemptions, the new Taxable Value was $140,000. This is $60,000 less value than a first-time non resident buyer would have for the same property.

Real Estate property taxes were not conceived as a progressive tax. They were to be based purely on the value of the property. This concept goes back to antiquity. Real estate tax is known as an “ad valorem” (Latin for as to value) tax. Just as the “wealth tax” now being touted by presidential candidate Elizabeth Warren, the taxable value is to be based on the totality of the asset.

Many states, but most significantly Florida, have bastardized that original concept. By allowing for a proliferation of tax exemptions, artificial capping of assessments and, most recently, portability, real estate taxes have now entered the realm of government choosing tax beneficiaries like our chaotic federal income tax system.

Florida has a politically complicated real estate tax system that has resulted in an unfair playing field for classes of property owners and local governments that rely on those taxes. A rent control analogy is applicable to the “Florida System” of real estate taxation. Much of the taxes that residential owners will pay are based in how long they have been Florida residents.

If you bought a home in 2000 and became a Florida resident, your assessed value is capped using the 2000 market price. Your home may have climbed in value to triple what you paid for it 20 years ago, but that is immaterial to what you will pay because of “Save Our Homes.” The tax you pay is not based on anything more than when you happened to have moved into the home and had declared a homestead. The 2000 value could be a million dollars and your neighbor, who just purchased an exact replica yesterday for 3 million dollars, will pay substantially more in property taxes.

The reason given when “Save our Homes” was instituted was for the poor widow who could no longer afford to live in the family home. This, of course, was a similar excuse used when rent control was being instituted. The unintended consequences of this policy are the perversion of the real estate market. Billions of dollars of real estate value are prevented from being taxed because of illiquidity. Governments must compensate these individuals by relying on business and non-homestead properties to pay a greater share of the tax burden than is equitable.

The cocooned homesteaded owner has an incentive to demand greater and greater services from local government but not pay his/her fair share for those demanded services. This further increases the expectations on localities with non-taxed or insufficiently taxed voters calling the shots with businesses and non-homestead owners picking up the costs.

If this is not corrected at some point, the inequalities will have an adverse effect on the state’s economy. Taxes must be shouldered as equally as possible by all property owners to be fair. The state should not try to place societal goals that are better left to other governmental means on the property tax system. There needs to be a restoration between value of the property and the amount paid by the owner.

 

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