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Proposal zeroes in on tax disparity

A representative's plan would limit how much of a house's value can be tax-free and double the homestead exemption.

By LETITIA STEIN and JONI JAMES
Published April 1, 2006

TALLAHASSEE - As Floridians clamor for relief from escalating property taxes, a key lawmaker on Friday pushed a dramatic solution to the problems created under the Save Our Homes tax cap: Start phasing out some of its benefits.

The plan unveiled by Rep. Fred Brummer, R-Apopka, would ask voters in November to impose future limits of $100,000 to the valuation break they receive under Save Our Homes. In exchange, he would double the homestead property exemption to $50,000.

"I see this as an opportunity to move forward with something that's absolutely imperative for the state of Florida, and that is property tax reform," Brummer said. He said he is open to further debate and points out that the Senate has yet to embrace anything like his idea.

Under Save Our Homes, market values can rise fast, but the assessed value - the baseline for taxes - can go up only as fast as inflation, or 3 percent, whichever is lower. That causes wide gaps between market value and the portion of a home's value that's taxable.

If approved, here's what it means for the typical homeowner in Pinellas and Hillsborough counties, who has about $50,000 shielded from taxes by Save Our Homes.

After Jan. 1, 2007, that homeowner could shield a maximum of $150,000 - whatever the homeowner had in tax savings before the law change, plus $100,000.

When the home's market value rises enough that the difference between the market value and the assessed value reaches $150,000, the tax breaks would stop. After that, any increase in market value would add directly to the home's assessed value, causing the tax bill to grow with the increased market value.

Brummer would allow a homeowner who wants to move to carry up to $100,000 in taxable value breaks to a home of equal or greater value in the same county.

The proposal from Brummer, the House's point man on property taxes, marks a shift in the Legislature's debate this year. For weeks, lawmakers have discussed ways to allow homeowners to transfer the existing property tax benefit if they buy new homes.

That would help existing homeowners. It does little for newcomers, but over the years Brummer sees his proposal as a way to restore fairness to the tax structure.

As a deal sweetener, the homestead exemption would double from $25,000 to $50,000 over the next decade. From then on, the homestead exemption would increase with inflation.

It amounts to an overhaul of the Save Our Homes system that voters created in 1992. While promoted as a way to keep the elderly from being taxed out of their homes, it has created wide disparities in tax bills among neighbors. After the market's recent value increases, it effectively has trapped many in their homes, since their taxes would soar upon moving.

"Before Save Our Homes, we lived in a world where they paid on fair market value," said Bob McKee, a lobbyist for the Florida Association of Counties. "This would put some people back in that world."

Still, Florida's counties are concerned about the fiscal impact of the proposal, particularly outside of the larger urban areas, where doubling the homestead exemption would cut deeply into the tax base.

Gov. Jeb Bush said he is reserving judgment until the full financial picture is known.

"Given the extraordinary increases in assessments over the last three or four years, this is worth looking at," Bush said. "The question of the impacts on local government would have to be analyzed."

No one in the Senate is proposing a plan similar to the House measure. Senate President Tom Lee, R-Valrico, acknowledges problems in the system but is not committed to a rapid fix.

"I think a bill this year is going to be a very, very difficult thing to build compromise around," Lee said.

Even in the House, Brummer's plan remains controversial. The Finance and Tax Committee approved it 5-3 on Friday, with supporters stressing that debate is just starting.

Rep. Carl Domino, R-Jupiter, is sponsoring a competing proposal that would allow homeowners to carry to a new home unlimited Save Our Homes benefits. Brummer, the committee chairman, considers the Domino legislation a gift for the wealthy and remains unwilling to consider it.

But Brummer would discuss tweaks to the $100,000 cap on future benefits, perhaps by raising the figure or adjusting it for inflation costs over time.

Statewide, the vast majority of homeowners are under the proposed $100,000 cap. In Pinellas and Hillsborough, for example, 75 percent get a valuation break of $68,000 or less.

Times staff writers Matthew Waite, Jennifer Liberto and Alex Leary contributed to this report. Letitia Stein can be reached at lstein@sptimes.com or 850 224-7263.

[Last modified April 1, 2006, 00:54:05]