Q&A of the Day – Local Revenue from Homesteaded Property Taxes
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
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Today’s entry: Q&A. Brian. I am avid listener and supporter of your show. I am not in favor of ending property taxes on homeowners in Florida. How can we hold our elected officials accountable if the income math changes overnight? PBC needs help. If this ends up on the ballot, we know it wins. Then how do we replace the 2B we get from property taxes. The concept might have merit. But without a thought-out plan, how does govt function? How do we share the cost of operating?
Bottom Line: These are good questions, and they’re questions that will come up time and again should the state legislature follow through with Governor DeSantis’s plan for the legislature to pass a proposed constitutional amendment for voters to consider during next year’s November’s elections. Throughout the course of this year as the debate has played out, most recently with the onset of the Florida DOGE audits (which we will soon see the results of), I’ve addressed aspects of what you’re asking for but will seek to tie it together today.
I’ll take your questions in the order you presented them starting with accountability. Many states and/or local governments exempt certain people from paying property taxes. Common examples of this include senior citizens, veterans and disabled homeowners. There is no evidence of these groups having been treated differently or having lost influence with locally elected officials in their communities after having been exempted from paying property taxes. One way of thinking about the potential implications from an accountability perspective is the way that all other elected politicians are held accountable. For example, have you noticed your congressional representative identifying those who pay the most in federal income taxes and super serving their interests? Accountability would likely be the same as it’s been as registered voters in given communities are going to be your homesteaded property owners. The one caveat that could be argued on this point would be business owners.
It could be argued that the elimination of property taxes for homesteaded properties could lead to local communities seeking to super-serve commercial interests as business owners would be paying property taxes, and as local sales taxes would be a more important part of the revenue stream for many communities. There could be pros and cons to that dynamic were it to play out that way. In the same breadth, snowbirds, and landlords would also likely gain additional consideration, even without holding votes within the communities. Basically, there would be a benefit to communities to have more of them.
As to the statement that if this makes the ballot it would pass, potentially, but it may not be a slam dunk. It’s dangerous to read much into any off-election year polls about hypothetical situations, to say the least, with that said there’s only one poll I’ve found that shows that the elimination of property taxes on homesteaded properties would clear the needed 60% threshold of voters to amend the state’s constitution. It was a newly conducted James Madison Insitute poll showing support at 65%. That would imply it’s far from a slam dunk if on the ballot. That’s especially true due to what’s likely to happen from a marketing perspective if this proposal is on our ballots next year. You’ll likely have just about every county government, municipal government and taxing authority in the state (schools/teachers, fire fighters, police, etc.) come out publicly against the proposal.
I currently believe it would be an uphill battle to pass this proposal. As for the rest of the considerations, including where the revenue to operate would come from... It’s actually much easier than most think.
Earlier this year the Florida Policy Insitute, which is opposed to eliminating homesteaded property taxes, produced a related report. In it they identified that within Florida, homesteaded property taxes accounted for 18% of county revenue and 17% of municipal revenue. While that can vary considerably from community to community based upon the location, composition of residential vs. commercial interests etc., it paints an instructive picture. Especially with Palm Beach County specifically in focus. Last year $1.76 billion in total property taxes were collected (homesteaded and non-homestead) and even the total amount with non-homestead properties came in at 19% of the current county operating budget.
Consider this: How efficient is Palm Beach County’s government? A Florida TaxWatch Study found that PBC loves taxing and spending...this includes statewide...the 4th highest overall property tax collections (58% above average), 8th highest in county-only property taxes (40% above average), 3rd highest in municipal property taxes (77% above average), 11th highest in combined county + municipal revenue (11% above average), and just for good measure local option sales tax revenue: 6% above the state average too. In other words, there’s likely lots of room for there to be some DOGEing to do.
In my analysis at the time of the Palm Beach County DOGE audit, I found that adjusted for inflation and population changes, PBC government spending had risen by greater than 15% over the prior five years. A figure that’s higher than the homesteaded property tax revenue. In other words, to the question of how could they run the government without the homesteaded property taxes? The answer would be the way they did in 2019. And my final related point is this... Every local government has already done this type of thing.
During the Great Recession there was an average 40% decline in property assessed values from the top of the housing boom to the bottom of the housing bust. The decline was mitigated to a degree due to many local governments raising mileage rates to compensate. Still, however, the average decline in property tax revenue during the Great Recession was 13%. A figure that’s close to what we’re talking about here with the potential elimination of homesteaded property taxes. In fact, during the Great Recession several studies were conducted regarding moving away from property taxation for revenue. The most significant was published in Science Direct in 2011 entitled: Rethinking government reliance on the property tax.
Aside from these considerations, as I’ve mentioned since the onset of this debate and for decades before it, I firmly believe property taxes – all of them – are un-American. How can you say you ever own property if governments can seize it from you if you don’t continue to pay them taxes annually for it? To me this is about the premise aside from the other considerations. I reject the premise of property taxes, and we should all seek to put an end to this form of taxation. Local governments have raked in windfall increases in property taxes for years and most often have spent every penny. Once the DOGE reports begin to be produced this should become clearer.