Housing woes drain tax plan's savings
People aren't moving or buying, which hurts Save Our Homes.
By ALEX LEARY, Times Staff Writer
Published December 8, 2007
TALLAHASSEE - The property tax plan up for statewide vote next month is supposed to restart Florida's economy.
But the gloomy housing market already is cutting deeply into projected savings of the plan.
State economists on Friday downgraded the five-year savings by $3.2-billion, or 25 percent.
It now stands at $9.2-billion, down from $12.4-billion, largely because not as many people are expected to be moving.
"There's just no activity now in real estate," Amy Baker, coordinator of the Legislature's Economic and Demographic Research Office, said in an interview after Friday's meeting.
"People just aren't willing to make that step," she said. "They know loans are harder to get and view the economy as riskier."
The diminished size of the overall tax cut could spell further trouble for Gov. Charlie Crist and other backers of the plan, already straining to raise money to sell voters on the Jan. 29 referendum. Crist went to New York on Thursday for a $1,000-a-person fundraiser with Donald Trump. A Crist spokeswoman did not return messages seeking comment Friday evening.
The plan already was under assault from critics who said it offered meager savings - about $240 a year - to those who had no intention of moving while taking billions from local governments and schools.
"A lot of folks were upset that it did not cut enough and now they'll be even more upset," said state Rep. Dan Gelber, D-Miami Beach, who opposes the plan.
The tax cut plan calls for doubling the $25,000 homestead exemption, allowing homeowners to carry Save Our Homes benefits when they move and providing businesses with a modest exemption and a 10 percent annual cap on assessments.
The primary reason for the reduction is a belief that far fewer people will be moving and thus taking advantage of Save Our Homes' "portability."
Save Our Homes caps annual assessments at no more than 3 percent. Over time, homeowners accumulate a significant protection against the actual market value of their homes. The Jan. 29 proposal allows people to carry up to $500,000 in savings when they move.
This provision - a centerpiece of the deal and which Crist campaigned on when he was running for governor - was expected to save $5.6-billion in property taxes over five years. Friday's estimate put it at $2.7-billion. That's because fewer people may move and also because their Save Our Homes benefit is currently shrinking. Even if the market value of a home goes flat or declines, the owner must still pay 3 percent more under Save Our Homes.
Forecasters also say a proposed 10 percent assessment cap for businesses and second homes is too rich. Instead of the $1.2-billion estimated savings over five years, it is more like $900-million, Baker said.
There is an upside to the smaller property tax numbers. The cut in school budgets would drop from $2.8-billion to $1.5-billion. Much of the criticism levied against the plan stems from its impact on public education.