www.waterfrontjim.com/propertytax/Summary.htm

 By Marc Caputo and Steve Bousquet, Times/Herald Tallahassee Bureau
In Print: Sunday, February 15, 2009

TALLAHASSEE — Property taxes in Florida have not dropped “like a rock” as Gov. Charlie Crist said they would, but he’s going to keep trying to make good on a promise made two years ago.

The Republican governor’s goals for the spring lawmaking session include four separate tax proposals that would go before voters on the 2010 ballot, when Crist himself would be seeking voters’ favor as a candidate for re-election as governor or election to the U.S. Senate.

The total taxpayer savings — or cost to all local governments and schools statewide — could weigh in at roughly $600 million, according to preliminary staff estimates and prior analyses of similar proposals to help homeowners and cap and limit local-government taxation.

“You want as much relief as possible,” said Crist, who would not confirm details of the proposals. “People have been complaining about property tax increases for a long time. We’re all aware of that.”

The tax package, to be unveiled this week, is still evolving. But Crist’s aides have explained them to key lawmakers, who shared details of the following four proposed constitutional amendments with the Times/Herald:

• Cap government spending by limiting cities’ and counties’ tax collections. Any taxes collected above the rate of inflation and population growth would be kept in a “stabilization fund” in case of emergencies. Legislative Republicans want the cap to apply to the state government as well.

• Limit growth in the assessed value of businesses, vacation homes and other nonhomesteaded properties to 5 percent annually. Those assessment increases are now capped at 10 percent a year due to the passage of Amendment 1 in Jan. 2008.

• Aid first-time home buyers by increasing the homestead exemption to 50 percent of the market value of the home. The exemption’s value would decrease back to zero over five years. Maximum exemption: $500,000.

• Prohibit tax-assessment increases on homesteaded properties whose market values decline — a quirk in the current Save Our Homes system known as “the recapture rule.”

Crist said it makes no sense. “There’s some frustration among homeowners who have to pay more taxes when their homes lost value,” said Crist. He’s also tentatively proposing a statutory plan to make it easier for businesses to challenge property-tax assessments.

That proposal is the only tax plan that requires a straight up-or-down vote.

The constitutional amendments will need to pass by a three-fifths vote in each house: 24 in the Senate and 72 in the House. In each chamber, the proposals can pass without any Democratic votes.

Voters must approve the final amendments with a 60 percent vote.

Sen. Dan Gelber, D-Miami Beach, who has not been briefed on the proposals, voiced skepticism, saying Crist’s plans might perpetuate the imbalance in Florida’s property tax system in which longtime property owners receive greater benefits than newcomers.

“The problem with Florida’s tax code is its inequities,” Gelber said. “You can’t deliver relief until you deliver reform.”

For example, he said, a 5 percent tax cap for businesses would result in two gas stations on the same intersection paying wildly different tax bills over time, with the older gas outlet enjoying a locked-in benefit, and the newer station paying much higher taxes.

“This isn’t the time to be doing that,” said lawyer-lobbyist Ron Meyer, who represents the Florida Education Association.

“While he’s to be applauded for using the word ‘revenue,’ he should be talking about how to increase it … not decrease it at a time when schools are suffering like never before.”

Meyer said the union might also oppose another Crist priority that would require up to 70 percent of school money to be spent “in the classroom” because it’s unclear how “classroom” is defined.

Said Gelber: “That’s a gimmick. It sounds really good, but it’s not a policy anybody can truly gauge, because ‘the classroom’ can be defined differently. And 70 percent of diddly is still diddly.”

Opponents of property-tax cuts also question some of the conventional wisdom pushed by Republicans, who said the economy would improve after they passed a property tax cut in 2007 and persuaded voters to approve another in 2008. Since then, the economy has only worsened.

Echoing other Republicans, Sen. Mike Fasano of New Port Richey said Florida would have been in worse shape without the tax cuts. He said people need more.

“People are hurting, and it’s just unfair to increase their property taxes when their property values fall,” said Fasano, a sponsor of the tax-cut measure.

Marc Caputo can be reached at mcaputo@MiamiHerald.com.

According to the latest data from the Investment Company Institute, cash invested JUST in Money Market mutual funds recently overtook that invested in stock mutual funds: $3.83 trillion – an amount equivalent to nearly half the S&P 500’s total current market cap.

This is the highest such reading (Money Market Funds/S&P 500) in 25 years.

Florida’s Inequitable Property Tax scares away thousands of potential buyers every year.  Those that do buy would purchase more expensive properties !

International buyers are major players in the Florida residential real estate market, accounting for 15 percent of total home sales, according to a new joint study conducted for the Florida Association of Realtors® (FAR) by the National Association of Realtors (NAR). 

http://media.living.net/releases/InternationalStudy.htm

 For a long time, anecdotal evidence from Realtors® has suggested that international buyers play a sizable role in Florida home sales, but this study marks the first attempt to quantify the trend. 

January 21, 2009

by waterfrontjim

Citizens must contact all their political Representatives and urge the end of the real estate tax before it drags us into the worst period of depression and stagnation in our history.

If real estate taxes are ended we will witness an immediate and dramatic turn-around in the residential and commercial real estate market.

This turn around will quickly spread through all sectors of the economy.

It will save the banking industry, it will bring support to and raise real estate values and will create permanent and meaningful job growth.

This is the first of a series of reports that establishes the case that the real estate tax is the fundamental source and the primary catalyst of the real estate/financial/economic catastrophe.

 In Florida , Total State and Local Government spending rose from $54.3 billion in 1992 to $162.2 billion in 2007.

Florida collected $30.5 billion in property taxes in 2006, which is nearly twice the tax collected in 2000.

 Between 2000 and 2006, State and Local Government spending grew from $84.3 billion to $140.5 billion, an increase of $56.2 billion or 67%.

In the past six years, the average Floridian’s property taxes rose 100 percent, while their personal income growth was limited to 44 percent.

Ask any buyer, owner or seller of real estate and they will tell you the problem is not the price of real estate, or the interest rates.

It is the real estate tax: because you can own your property free and clear, or you can pay off or refinance a mortgage. But the real estate tax never goes away and usually keeps going up.

Although many causes of the crises have been given and solutions proposed, there are no members of Congress, no Mayors, no County Executives, Governors, nor public employees and their unions who will admit the real cause of this crises.

Why? Because the real estate tax is the gravy train they have hitched a ride on since the early 1990’s during the unprecedented rise in real estate values.

 Today there can be no effective economic stimulus plan that does not include the elimination of the real estate tax.

The Government’s actions to stimulate the economy will be like having one foot on the accelerator while the other is on the brakes.

The Real Estate Tax Scam began in a subtle way. Prior to 1972 states and localities received categorical federal funding with its high overhead, many restrictions and reporting requirements.

In 1972 Nixon and Congress implemented General Revenue Sharing with the States and localities who received funds with budgetary discretion. After fourteen years the Revenue Sharing legislation expired September 30, 1986,

The Reagan Tax cuts gave rise to the economic boom and prosperity of the 1990s but by the late 1990’s these taxpayers gains were beginning to be slowly but steadily being taken away by the real estate tax.

State and local governments began to realize the real estate tax was the perfect scam. As real estate values began to rise, massive revenue windfalls were generated by real estate taxes based on rapidly increasing assessments.

With no curbs on their appetite, State and local government expanded budgets to spend the windfall instead of reducing taxes and using realistic and conservative zero based budgeting.

The local political jurisdictions established “Just Values” on which taxes were based.

 But there was an inherent conflict of interest. They were also the direct beneficiaries of the revenues needed to maintain their own out of control public payrolls, rising salaries, benefits and pensions.

They had the ultimate tool of coercion: the forced tax sale and loss of the property owner’s home or business property if the tax was not paid.

The scam had the additional feature of being an increasing annuity in perpetuity or so it was assumed. State and local taxing and spending authorities have used the real estate tax to kill the goose that layed the golden egg.

As real estate taxes rose dramatically, pegged to rising market values and so called “Just Values” of the underlying real estate, knowledgeable prospective buyers were the first to question unconscionable and inequitable real estate taxes.

When you buy a home and get a mortgage you can safely predict that your monthly costs will be fixed for the next 30 years.

But the property tax is not fixed, is out of the property owners control and will likely escalate into the future.

As real estate taxes rose, new prospective buyers were turned off and turned away.

Existing owners, with Homestead protection enjoyed the lower taxes and were discouraged from moving and exposing themselves to new higher taxes.

The “move up market” slowed down. While the demand for real estate ebbed, the supply continued to grow.

It was easy for new residential and commercial developments to get approved by fiscally liberal local governments with appetites for expanding the real estate tax base to support their addiction for spending.

New prospective buyers were the first to become wary of out-of-control real estate taxes because the system was based on First In-Lowest Tax, and Last In-Highest Tax.

In other words, the most recent buyers paid the highest tax based on the current market value while others were often protected by Homestead Laws and other exemptions which capped tax increases for owners who bought in prior years.

Also, second-home owners usually from out-of-state or even out of the country, as non-residents, did not vote and did not qualify for the protection of Homestead Laws.

As their real estate taxes escalated increasing numbers of these property owners chose to sell and cash in on the appreciation in their home values.

Thus, the continuing increase in new supply and the real estate tax-induced decrease in demand from fewer buyers and more sellers, caused property values to flatten and then, ultimately, decline.

 The fallacy of the real estate tax is that it is based on an Unrealized market value and assumes an ability and willingness to continue to pay the tax…forever.

In reality today, the future value of the annual real estate tax invested at only 5%, in less than 25 years will exceed the value of the property.

That means that a cash buyer with no mortgage payments, is merely renting the property from the local government and maintaining and improving it at their own expense.

Because of the real estate tax, it is no longer economically rational for anyone to own residential, investment or commercial real estate.

The real estate tax has also had the negative consequence of discouraging property owners from improving their properties.

Aggressive local governments promptly reassess properties for the value of improvements resulting in higher property taxes. This has significantly retarded consumer spending, job creation and retail sales.

The real estate tax has impeded the mobility of the population and the work force. Whenever a move is made it usually results in a new and higher tax assessment.

The real estate tax is dependent on an equitable, accurate and consistent system for assessing the market value of properties. Unfortunately, this is impossible.

Only buyers and sellers in a free and open market can define a market value and this a dynamic constantly changing process.

The futility of creating a rational system of annual property assessment has resulted in a huge and expanding dysfunctional bureaucracy throughout local government across the United States.

The more the property assessment system has become filled with internal inconsistencies and contradictions the more taxpayers have been appealing their assessments.

This has also led to an increase in the bureaucracy needed to process these appeals.

There is now a valid argument that the entire system lacks due process and has raised numerous issues regarding the unconstitutionalilty of the system of real estate taxation.

The distinction created by the real estate tax assessment system between Homestead and non-Homestead property owners is fundamentally unconstitutional. It creates a separate class of taxpayers who are discriminated against.

Also, the significant disparity in taxes paid by Homesteaded and non-Homesteaded owners of similar properties has encouraged the latter to attempt to gain Homestead status by falsification of Homestead status. This has led to a criminalization of otherwise law abiding taxpayers who are merely trying to keep from losing their properties to excessive and inequitable taxation.

Property Assessors Offices have added significant numbers of staff to prosecute “Homestead Fraud” with fines, penalties and even threats of jail sentences.

The real estate tax has killed the “move up” market. A healthy dynamic housing market needs a move up mentality, i.e., “Keeping up with the Joneses”. Most of the few buyers that are now purchasing are moving laterally or downward to escape the dreaded increase in “Just Value”.

WIth declining demand for higher end homes because of exorbidant taxes, the price of these homes drop. This drop in high end values compresses and puts downward pressure on the entire price structure.

Communities benefit from a healthy high end housing sector which anchors values, raises the bar of value and encourages people to improve their properties.

A tragic result of the real estae tax fiasco affected the first-time subprime buyers. Many who received mortgages were at least prepared to pay a mortgage with fixed payments. But what many low-income owners did not understand or plan for was rapidly increasing property taxes during the period of rapidly appreciating property values.

This more than any other factor, was the straw the broke the camels back. Many first time low income buyers did not have their taxes escrowed. Once a year they were hit with a lump sum tax bill. If they didn’t have the savings cushion to pay the tax bill, this was enough to throw their property into a tax sale. Once this occurred there was no reason to pay the mortgage and foreclosure resulted.

Notes: Revenue sharing, which started in 1972, distributed $4.5 billion to 39,000 municipalities in the fiscal year 1986 when the program was terminated. It affected more local governments than any Federal program in history and was the only Federal assistance given to most cities with fewer than 10,000 residents. Since it was the only Federal disbursement without restrictions on the use of the money, it was also a small but key component of the budgets of middle- to large-size cities. Posted in Economy