Summary
Amendment 1 would expand Florida’s homestead exemption program, adding the exemption from property taxes of the $25,000 of home values between $100,000 and $125,000. Thus, no property taxes would be assessed on the first $125,000 of a home’s value, except for school levies, which are exempted from this measure.
Fiscal Impact
Some estimate that Amendment 1 would result in annual statewide losses of $650 million in local government revenues. For example, Miami Dade County could lose approximately $76 million per year.
Proponents’ Argument For
Proponents argue that this is a tax cut for working Americans and would allow more people to afford homes. Since the recession and subsequent recovery, property tax revenues, not rates, have been slowly climbing. Proponents say this creates an opportunity to cut taxes that would help Floridians, spur the economy, but not significantly reduce revenues. Proponents argue that the impact on local government revenues will not be as severe as predicted because the effect will be very small in areas with lower valued homes and because school levies are exempt from this measure. In addition, the Florida legislature has already provided a subsidy for fiscally distressed counties who may lose revenue due to this measure.
Opponents’ Argument Against
Opponents argue that this is an unfair tax giveaway to the wealthy that would not help Florida’s economy, low-income earners, or fiscally-constrained county governments. The law requires that all be equal before it, but homestead exemptions like this one violate that principle by arbitrarily giving financial benefits to those who own homes, while renters are not bestowed equal benefits.
In addition, they argue, this law affects property taxes, the single most important component of local government revenue in Florida. Using a subsidy from the state to cover losses only masks the negative impact this would have on government finance with little-to-no proof that there would be a net benefit to the economy.
Discussion
Tax cuts are almost always a good thing. There are some reasons why cutting property taxes in Florida might not be the best way for Florida to cut taxes, however.
First, this amendment would only apply to homeowners and not to other property owners, including commercial properties and rental properties (and therefore renters).
The subprime loan experience prior to the last recession showed that encouraging more people to buy homes via public policy is not always a good thing for the economy in the long-run. In Florida, in particular, reducing property taxes only on homeowners doubles down on state policies that tax visitors rather than state residents—even for services for which residents are the primary customers.
A cut in all property taxes would be fairer. Additionally, it would not suffer the same economic distortions that arise from only cutting taxes for one narrow class of citizen.
While property tax revenues are projected to rise steadily in Florida, this measure would affect revenue for the state’s counties. The Florida legislature has anticipated this and provided a subsidy to those counties specifically impacted by Amendment 1. While that may offset some of the local revenue impacts of the measure, it would further shift funding sources from local to state, making local governments increasingly dependent on the state and annual legislative decisions for larger chunks of their revenues.
Floridians greatly value local control over state-level decisions as much as possible, but with local control comes responsibility for raising and managing revenue. Shifting another chunk of tax revenues up to the state level and relying on the legislature to approve a backfill subsidy would increase local dependence.
Voters’ Guide to the 2018 Florida Ballot Amendments
The Voters’ Guide examines the proposed amendments to the Florida Constitution that are on the Nov. 6, 2018, ballot.