From Clintons $500k exemption to Save Our Homes in FL. From bubbles to foreclosures. The history of mismanaged manipulation of taxes at the Federal, State and Local government level and the mess we are in now....
Shifting the burden: Can they resolve Florida's property tax dilemma?
palmbeachpost.com Michael C. Bender
Palm Beach Post Capital Bureau
Sunday, March 04, 2007
TALLAHASSEE — Stuck in South Florida traffic last week, House Speaker Marco Rubio dialed up a Miami radio talk show host who was discussing property taxes.
Within minutes, a deluge of impassioned listeners called in to debate one of the most powerful men in the state legislature.
In Tampa days later, an elderly man was moved to the point of tears as he stood in front of hundreds of people and said his property tax bill could force him off land his family had owned since the 19th century.
Hundreds of taxpayers, most of them snowbirds, told similar stories of tax woes to a Senate panel in Fort Pierce a week before and in Lake Worth two weeks earlier.
Lawmakers acknowledge they are staring down the barrel of a property tax revolt that promises to dominate the 60-day session, which starts Tuesday.
"People feel trapped in the home that they're in right now," Gov. Charlie Crist said. "The freedom that they should have to move to a larger home or downsize even, that has to come about. And I know it will."
Crist touted several measures of property tax reform in his campaign for the state's highest elected office last year.
But three of Crist's four ideas for tax relief are not among the 1,800 bills introduced so far by lawmakers, although the Senate has not yet introduced its plan.
In the meantime, it was Crist's fellow Republicans in the House who grabbed the spotlight and shaped the early debate on what lawmakers say is the most pressing issue in the state this year.
"We wanted to have ... public policy that was innovative and bold and didn't just think outside the box, but, quite frankly, built new boxes," Rubio, R-Coral Gables, said when unveiling his proposal two weeks before the start of session.
His two-pronged plan includes one proposal to cut property taxes by an average of 20 percent statewide and another to replace homestead taxes with a 2.5 cent increase in the statewide sales tax.
Rubio said he thinks the proposals do build new boxes. "They address an important, critical issue for our state's future in a bold and innovative way."
At the least, they have captured the attention and imagination of thousands of Florida residents, business owners and local government officials, who reacted to the plan with a range of opinions.
The roots of frustration
The origins of the modern-day property tax can be traced to a curious levy on privately owned city urinals and closets of the early Roman Empire.
Over the next 2,000 years, the property tax was nipped and tucked until the 19th century, when one influential economist deemed it "more thoroughly American" than any other tax.
But that economist also pleaded for major changes in how it was levied.
"In short, the general property tax is so flagrantly inequitable that its retention can be explained only through ignorance or inertia," Edwin Robert Anderson Seligman, an influential Columbia University professor, wrote in his 1895 Essays on Taxation. "It is the cause of such crying injustice that its alteration or its abolition must become the battle cry of every statesman and reformer."
Some of Seligman's complaints about the tax - that appraisals varied from one county to the next, government spending had increased too rapidly, too many unbalanced exemptions existed and it did not adequately represent a person's ability to pay - could be cut and pasted into today's debate in the Sunshine State.
But the problems for modern-day Floridians do not stem from the effects of the Industrial Revolution on an agrarian society, as it did for Seligman.
Instead, Floridians have been hamstrung by their own rising property values and increasing government budgets.
It's been a problem for decades.
"What happened in the '80s is happening again," said Ken Wilkinson, the Lee County property appraiser and author of the Save Our Homes amendment that Floridians approved in 1992.
The amendment put a 3 percent cap on property tax bills for homesteads, which are residents' primary homes.
But looking back, Wilkinson, a Lake Worth High School graduate, said the amendment failed to restrain government spending and should have allowed homeowners to transfer their accumulated savings to a new home.
"We did beyond what we anticipated," Wilkinson said. "I can't imagine what our state would look like without it. Talk about a tax revolt, my heavens."
The Save Our Homes amendment drew on California's controversial Proposition 13, which reduced property taxes by 57 percent but hampered the state's ability to fund schools.
The California plan, approved in 1978, touched off similar changes in other states: revenue limits in Massachusetts in the 1980s and spending caps in Colorado in the 1990s.
The plan from Rubio and his team of House Republicans draws on those measures as well as steps taken last year by lawmakers in Idaho, South Carolina and New Jersey to increase the sales tax by a penny in exchange for a reduction in property taxes.
But some warn against the trend.
"While lowering property taxes is certainly politically expedient, since politically important senior citizens complain the loudest about them, there is no economic justification for such swaps," economist Curtis Dubay wrote in an analysis last year for the Washington, D.C.-based Tax Foundation. "Politicians in other states should be wary of such swaps in the future, although there are sure to be more swap proposals due to the current uproar over property taxes."
But Rubio disputes that opinion. He insists that cutting property taxes by $6 billion will give Floridians more to spend in the economy. He also says that increased spending, paired with a sales tax increase, could eventually mean more money for local governments.
"A consumption tax means you decide how much taxes you're going to pay," Rubio said. "Right now on a property tax you have very little control over how much you're going to pay, unless you refuse to paint your home and fix your roof and pick up your garbage. But why would you want to encourage that through your tax policy?"
After hearing about Rubio's plan, residents flooded their lawmakers' in-boxes with questions of when it would take effect.
It was no surprise for legislators who watched their constituents pack a dozen hearings around the state, including ones at Palm Beach and Indian River community colleges, to gather thoughts on property tax reform.
Rubio, too, heard the outcries when he toured the state last year looking for the state's 100 most innovative ideas.
While he asked for ideas on any topic, no issue came up more frequently than rising property tax bills, he said.
Residents were surely upset about their tax bills, but it's less clear how much they contributed to the proposed House solution.
The idea of swapping sales tax for property tax initially was pushed by Rubio's budget consultant, Donna Arduin, who was a member of former Gov. Jeb Bush's Property Tax Reform Committee.
Arduin, who worked in the budget offices of Bush, California Gov. Arnold Schwarzenegger and New York Gov. George Pataki, also has ties to a consulting firm that supported the economics of what fiscal conservatives call the Fair Tax, a 23 percent national sales tax in exchange for abolishing the IRS and eliminating federal income tax.
Strengthening an economy with fewer taxes has been the calling card of Arthur Laffin, who runs a consulting firm with Arduin.
He was once an adviser to former President Reagan and is known as the "father of supply-side economics."
Laffin and Arduin are also working for Georgia's House speaker, who announced in January his plan to eliminate property taxes in exchange for a 5 percent income tax and 5 percent sales tax.
"People do not work to pay taxes," Arduin wrote in her explanation of the Florida House plan. "They work to earn an after-tax rate of return."
Nearly identical language is used in her firm's analysis of the Fair Tax.
"Trickle-down economics is one of the most empirically disproved theories in centuries," said Florida House Minority Leader Dan Gelber, D-Miami Beach. "What you're saying is, 'Don't worry that Rush Limbaugh will get a half-million-dollar tax break, because he's going to buy so many flat-screen televisions that we'll all get a piece of it.' They're rolling out an oldie but a goodie."
All eyes on Florida
Rubio's plan is scheduled for a hearing in the House on Friday, but leaders don't expect the first vote to happen for several weeks.
And while it remains to be seen whether the proposal will take its place next to the Roman property taxes in the annals of history, what is sure is that residents across the state and budget staffs across the country will be watching.
"Twenty years from now, this will make Florida a better place to live," said Grover Norquist, president of Americans for Tax Reform.
"And all it takes is one state to get it right like this and it will be the leader for other states." |
