Businesses, renters need tax relief too

By RICK McALLISTER, Special to the Times
Published October 14, 2007

From my office in downtown Tallahassee across the street from the Florida Capitol, I can almost hear the steady drumbeat for property tax relief.

Certainly there have been stops and starts, and polls show most Floridians still don't have a firm grasp on the details. But there is a sense of inevitability that state leaders will offer some form of tax relief to Florida property owners in the next year.

I am personally optimistic about the continuing movement toward property tax relief. Targeted cuts could help stimulate Florida's real estate market and soften the landing as financial activity returns to more sustainable levels.

I am less optimistic, however, about what the owners of commercial property can expect in the way of relief in the next year. Small-business owners and large employers alike have serious concerns that a proposal to expand benefits for homeowners, with no corresponding relief for commercial property, will perpetuate a dangerous imbalance.

As the Legislature considers new proposals from Gov. Charlie Crist and others to provide tax relief, we hope that they will give a hearing to some ideas that any voter would consider fair.

For example, the Legislature should consider a cap on tax growth for non-homestead property, one that would mirror (at 3 percent) the Save Our Homes cap. Thousands of renters in Florida, including many low-income residents still saving for their first homes, would feel the real financial benefits of protecting rental properties from large yearly tax increases. We tend to think of these property taxes as being paid by the landowners, but in reality the tax costs are often passed directly through to the renters who are least able to pay. They are the ones who would truly benefit.

In addition, capping tax growth on non-homestead properties would ensure that rapid increases in tax assessments do not place a disastrous and unexpected burden on small-business owners. A cap would make property tax growth a predictable cost. Imagine yourself as a small-business owner, working hard to scrape out a modest growth rate of only 3 percent, then getting hit with a tax assessment five times what you paid in the previous year. It's not hard to imagine the effect that this has.

Revenue is only one side of the equation, and recent history has shown us that government spending is very difficult to contain without meaningful checks. The best check on government spending is the people themselves. So another proposal that should be considered is a hard cap on the growth of government spending, with an override of the cap allowable by direct referendum. This way, the people would have direct control over their own tax burden, and governments would still be able to respond to those extraordinary circumstances requiring large spending increases.

Both of these proposals are fair, and sure to be popular. Many households in Florida would consider 3-percent annual income growth to be generous. Limiting government spending to 3-percent annual growth would be more than enough to sustain a healthy level of services.

Florida's homeowners have long appreciated both the Save Our Homes cap on tax growth, and the $25,000 homestead exemption, and would certainly approve fair proposals to expand these benefits to additional properties. While real estate prices were skyrocketing in Florida, most homeowners were protected from the greater tax burden that went along with their higher property values. It is unfortunate that commercial property owners had no comparable protections, and they are not currently being offered comparable relief.

Save Our Homes has resulted in disproportionate property tax increases for everyone except homestead property owners. In 2006, homestead property made up about 32 percent of the taxable property in Florida, or less than a third. Non-homestead residential property - for example, rentals and second homes - accounted for just over 34 percent, and non-residential property made up about a third.

Without Save Our Homes - in other words, if residential property taxes had grown at the same rate as non-residential taxes - homestead property would make up more than 45 percent of taxable property; non-homestead residential property would account for about 28 percent; and non-residential property would account for about 26 percent.

We know that property tax relief is coming, and the economic activity it generates will be good for Floridians. Given the situation of most business owners, I am hopeful that Florida's lawmakers will approach the state's property tax challenges with creativity, thoughtfulness and a sense of fairness.

Rick McAllister is President and CEO of the Florida Retail Federation, the 11,000 member trade association representing Florida's second largest industry.

[Last modified October 13, 2007, 20:52:03]