tampabay.com

Tax cuts skip hardest hit

By ALEX LEARY
Published May 21, 2007


TALLAHASSEE - Their anger ignited a movement.

A year ago, snowbirds, landlords and small business owners fed up with property taxes flooded government budget hearings and forced the tax-cut debate now engulfing the state Capitol.

But politics has a way of changing things.

The policy debate that followed, driven by a Republican Legislature and a populist governor, has focused mostly on helping the people who have shouted the least: homestead property owners already protected from runaway taxes.

"I guess more of them vote, " lamented Liz Barrett, who operates Barrett Beach Bungalows in Indian Shores, where taxes went up $12, 000 last year.

By promising homesteaders an expanding menu of benefits, politicians are left with far less money to help those hit hardest by the runup in the real estate market.

And the primary relief offered for nonhomestead property - a rollback of local taxes to a previous year's level - does not address the inequities that have shifted an increasing portion of the tax burden to businesses and second-home owners.

Taxes will go down under a rollback, perhaps significantly, but the disparity remains the same. In 2006, businesses paid about 20 percent more in property taxes than they would have if Save Our Homes, the 3 percent cap on annual assessment increases, wasn't keeping tax bills artificially low for primary homes, according to a state economic report.

"The plans don't really address people like us, " said Mary Bailey, who owns a body shop in Oldsmar. "All they want to do is get the headlines."

That emphasis will remain today as legislators resume talks on tax-cut proposals in hopes of reaching a deal before the special session next month.

The centerpiece: a new proposal by House Speaker Marco Rubio that would give homeowners an 80 percent exemption off the first $300, 000 of their home's value.

In announcing the plan this month, Rubio said other property owners would get exemptions, too. But details have still not been released.

Business leaders and others watching the tax debate said the omission sent a clear signal.

"Any solution that focuses on homesteaders is a political solution designed to get politicians re-elected, " said David McKalip, a St. Petersburg neurosurgeon and leader of the citizen group Cut Taxes Now.

"It's the populist approach that is classic Charlie Crist and the approach that I'm fearful Marco Rubio is being led toward, " McKalip added. "Rubio is maybe creating his own Tallahassee special."

Rubio, Gov. Charlie Crist and others deny nonhomestead property is getting short shrift in the discussion.

"The homestead issue gets a lot of attention because it's a more difficult one to address, " Rubio said.

Save Our Homes has created great disparities because the tax cut grows larger the longer a person lives in the home. So, owners of two similar homes could pay wildly different tax bills simply because one moved in before the other. Also, the savings disappear whenever a house is sold, which means longtime homeowners face a big tax penalty for relocating to another home, even if it is cheaper. People hurt under those scenarios are shouting for help, too.

Correcting the problem is not easy. There are constitutional and fairness concerns with allowing people to carry the tax savings with them, referred to in shorthand as "portability."

Crist is a proponent of portability, as is the Senate. Rubio's plan would make the homestead exemption so deep it would lead to a phase out of Save Our Homes, as would the plan offered by House Democrats. The Democrats have the only plan that provides a cap on annual business assessments. But some business groups say a cap could create the same problems that Save Our Homes does now.

Throughout the debate, Crist has seemed as though he was back on the campaign trail, talking about the "people" as "my boss." He isn't worried about giving homestead property owners more tax cuts.

"They don't have a right to relief?" Crist asked.

As ever, he said he is confident the final tax cut package will accommodate everyone. Crist spread that optimism in a meeting last week with more than a dozen top business lobbyists.

They worry that directing large tax cuts to homestead property will leave local governments searching for alternative ways to cover their budgets, such as higher impact fees.

"We want to make sure we're not left holding the bag when they are finished with special session, " said Barney Bishop, president of Associated Industries of Florida.

Not all options being considered ignore nonhomestead property. Rolling back local tax bases and limiting future budget growth would help all property owners. And there is consensus on providing a break of $25, 000 or more on a property tax that businesses pay on computers, copiers and other equipment.

Legislators also may change an assessment practice that looks at a commercial property's "highest and best" use when calculating its taxable value rather than what it is currently used for. Because of that, a small hotel on the beach can be taxed as though it were a high-rise condominium.

By and large, however, the focus is on homestead property owners. With immense pressure on the governor and Legislature to come away from the special session with a plan, some fear broad-based relief will suffer for a more popular cut.

"We know the voters, the homesteaders are the ones who get the attention of elected officials, " said Vicki Weber, a lobbyist for the Florida Chamber of Commerce. "We just want to get equitable treatment too."