For most, Florida's taxes not excessive
By STEVE GELLER Special to the Times
Published May 29, 2007
I agree we need to reduce our property taxes. Because of Save Our Homes, longtime homeowners are trapped in their current homes. Property taxes and insurance are preventing many people from buying their first home. Small landlords and small business owners are paying excessive taxes. We must ensure that property tax increases do not outpace the ability of Florida citizens to pay these taxes. However, before we make permanent tax cuts in the Florida Constitution, we need to have serious discussions about what cuts are reasonable, who should receive them, and their impact.
Although we need to reduce taxes and ensure taxpayers get good value for their tax dollars, it is inaccurate to say there is a statewide tax crisis.
According to the 2006 Report of the Tax Foundation, Florida ranks 39th in the nation in combined taxes as a percentage of income. I have seen other reports indicating that we are in the mid to low 40s. For 2007, our property taxes ranked 31st.
Although many people have been moving to North Carolina because of property taxes, we must remember Florida does not have an income tax or an estate tax, and it has relatively low excise taxes. The overall tax burden in North Carolina is substantially higher than the overall tax burden in Florida.
Although we do not have a statewide tax crisis, we do have a property tax crisis for some people.
Some politicians have been saying that we can reduce property taxes by 30 percent, 40 percent, 50 percent, or more without dramatic cutbacks in services. This is not an honest statement. I believe most people would agree that you can reduce local government budgets by 5 percent without any dramatic cutbacks. I don't know at what percentage the cutbacks become severe. Is it 10 percent, 20 percent, 50 percent or higher? At some point, it should be apparent to everyone that the cutbacks will be severe.
An honest debate would involve what level of taxes people are willing to pay, and what level of services they demand. Leading people to believe that there is a free lunch and that they can have dramatic cutbacks in taxes without dramatic cutbacks in services is not an honest debate.
Property values soared from 2001 through 2006, although they appear to be headed down right now. Local governments did not receive all of this windfall. First, homesteads were protected by Save Our Homes, and their taxes did not soar with their values. Second, most local governments reduced their millage. For example, Broward County reduced its millage rates by 23 percent over the past 10 years. I estimate that the "windfall" is only one-half as big as it would have been.
Even with this reduction, local government spending still went up far higher than population growth plus Consumer Price Index (CPI). This is accurate and completely irrelevant. Governments do not spend according to the CPI; they spend according to the Government Purchasing Index (GPI). CPI is a basket of goods such as food, clothing and appliances. It has had an average annual increase over the past 6 years of about 2.5 percent. GPI is a basket of health insurance benefits, pension benefits, gasoline for emergency vehicles and other local government expenses. GPI has grown at a far faster rate than CPI, as would be obvious by looking at the items.
In St. Petersburg, for example, where there are now 57 fewer full-time employees than in fiscal year 2001, city employee retirement expenses - the largest being public safety defined benefit plans - are 235 percent higher in fiscal year 2007 than in fiscal year 2001, a budget increase of $15.5-million.
Another reason for increases in local government spending is the cost of police and fire protection. We should not be surprised that we are spending more on police and fire today than we were before 9/11.
There still remained a small "windfall." Most local governments, recognizing that this would be a temporary windfall, adopted one of three policies. Some, like Jacksonville, reduced taxes to return most of the windfall to the taxpayers and recognized this could require tax increases when property values return to normal.
Some boosted their reserves, or rainy day funds, to the point where some cities now have reserves of 40 percent to 80 percent, which is far higher than usual. Others chose to make one-time expenditures. They primarily purchased land for parks, although in some cases money went for additional police stations, fire stations, or other needed and planned municipal or county buildings.
We need property tax reform in the state of Florida. We need to free people who are trapped in their homes, and to ensure affordability for many people who cannot otherwise afford their property taxes.
But we need to balance this with the need to protect our local services, such as police and fire, libraries, parks, juvenile programs, animal and mosquito control. We need to have an honest discussion about the appropriate balance. Those people who are suggesting that we can have massive tax cuts without massive service cuts are doing a disservice to the residents of the state of Florida.
State Sen. Steve Geller, D-Hallandale Beach, is the Senate Democratic leader.