Q&A of the Day – Will Local Governments Raise Mileage Rates if Property Taxes Are Cut but Not Eliminated?
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
iHeartRadio: Use the Talkback feature – the microphone button on our station page in the iHeart app.
Today’s entry: Submitted via Talkback: Hey, Brian, don't you think that increasing the homestead exemption is just going to prompt the taxing authorities. To increase the millage rates.
Bottom Line: Today’s note is in response to the recent Q&A discussing the possibility of raising the homestead exemption, as a listener suggested, as opposed to the outright elimination of property taxes. Notably, the conversation, and at times the debate, we’ve been having about property taxes in recent months as Governor DeSantis has pushed for the elimination of homesteaded property taxes...seems to be indicative of the mood across the state.
One of the recent developments is a James Madison Institute report entitled: Property Tax Relief in Florida: Challenges, Options, and the Path to True Homeownership. In the report, the institute included their most recent surveying of Floridians on the issue of property tax relief to see where there was currently enough support to potentially pass a constitutional amendment for relief next November. Broadly on the issue of property tax relief, they found 72% of Floridians now support a constitutional amendment that would provide for savings over current levels of taxation. As the summation to their report read: For Florida homeowners, the question is not whether property taxes should be reformed, but how far these reforms should go. If lawmakers combine fiscal discipline with solid solutions, Florida can lead the nation to provide long-lasting relief for generations. So, about that.
Here’s something remarkable that stands out within the JMI study:
Since 2000, Florida’s population growth has been 116%. During that same time property tax revenue collection has risen by a staggering 370%. In other words, property taxes have risen at greater than 3x the rate of population growth, showing that if local governments have the ability to collect higher than needed property taxes, local governments WILL collect higher than needed property taxes. This speaks directly to the crux of today’s question – if the property tax exemption is simply raised as opposed to eliminated, isn’t it likely that local governments will just raise millage rates to compensate?
The history of actions by local governments across the state as just illustrated suggests the answer is almost certain to be yes. So, about that...
According to Florida TaxWatch the average millage rate, or property tax rate accessed by local governments is just over 17 mils. It probably won’t surprise you to know that the average rate for all South Florida communities is far higher than the state average, and that is commonly the case throughout the Treasure Coast too.
Average mileage rate by county:
- Indian River: 15.4
- Martin: 15.5
- Palm Beach: 18.72
- St Lucie: 22.85 (highest in the state)
In terms of the view of the possible...under state law here are the current limits on mileage rates that can be imposed by local governments:
- County: 10 mils
- Municipal government: 10 mils
- School districts: 20 mils
Overall rates could go higher as well if voter referendums are approved. In answer to today’s question, without getting into all of the nitty-gritty possibilities, on balance the answer is yes – most local governments/tax authorities could seek to raise milage rates higher in response to property tax relief that doesn’t include the elimination of property taxes as very few authorities are at the current maximum allowable under law. This should be part of the calculus considered by voters as they weigh which of the proposals they favor in the state legislative session.
On of the other risks that is run by an approach like this is creating Florida’s version of punitive tax state for upper-income earners, property owners. For example, if property tax exemptions are made high enough to exempt most homeowners but leave higher end property owners exposed and local governments were to raise milage rates, it could create a “tax the rich” effect that could inhibit those of means for living, buying property, and relocating businesses here as many upper income earners have fled high tax states and cities for Florida precisely for this reason. Further shifting the tax burden risks punitive impacts to local economies.
As I’ve mentioned from the onset, I fully back Governor DeSantis’s proposal to eliminate property taxes for homesteaded properties on principle. The concept being that you never really own your property if local governments can take it away from you without paying annual taxes to retain it. All any homeowner is doing is effectively renting their property from each of the taxing authorities on their property tax bill.