Property Taxes and Oversized House


Lisa and Jaime, ages 57 and 59 live in a four bedroom, 3000 square foot Fort Lauderdale, Florida home. They've priced smaller homes and estimate that a townhouse with three bedrooms would provide ample room for the family. They've discussed about moving to a smaller home, but are staying put for now because the move would cost them $9,000 in taxes an increase of $2,500.

Like other families who purchased houses before the real estate boom, they are now stuck in oversized houses because they can't afford the additional sizable hit on their property taxes which would be imposed if they were to purchase a new house.

This situation developed due to the state's Save Our Homes amendment which holds increases to no more than 3% annually regardless of actual increases in value. For people like Lisa and Jaime who purchased their house in 1999, pre-housing market explosion, the cap on property tax increases was a way to dodge the high property taxes which are putting newer and smaller houses out of the reach of the average home buyer.

Now, the long time homeowners are also finding a problem with the tax cap. They can't afford to downsize, because the added property tax prices on a new home purchase would eat up any savings they might make in mortgage payments.

Florida is facing a problem which is similar to that of California in the 1970's. A wave of new residence and little management of growth have caused skyrocketing real estate values and property taxes. Homeowners in South Florida who haven't earned the state property tax cap have seen more than 100 percent tax increases over the past few years.

Although Floridians don't pay state income tax, they do pay burdensome hurricane insurance premiums which are in many cases higher than what state income tax would cost. In addition, salaries and wages are generally lower than those of California and Florida, the states with whom Florida is most often compared.

A special property tax session at the legislature is currently reviewing three plans. The House wants $85 billion in cuts, the Senate is requesting $15 billion and new Republican governor, Charlie Crist has a plan offering about $34 billion in tax cuts. Crist also wants substantial increases in the homesteaders exemption which is currently $25,000.

Revenues which have been lavish to local governments, thanks to the ballooning property tax collections would face a rollback to 2006 figures with potential for added cuts up to 9%. Needless to say, mayors and county officials are less than thrilled about that concept. State legislators state that it is time to bring local government spending back to reality.
The state property tax plan will need to allow for education funding, since local taxes currently pay most of the cost of education in Florida.

At present, legislators appear more likely to go with Crist's approach of a $31.6 billion cutback apportioned over five years. This cutback will probably require elimination of the property tax caps. The final plan will probably require a voter referendum in the state's presidential primary to be held in January 2008.

Gus Taperman holds a Bachelor's degree in Commerce and completed his master's in Business Administration. He is working as writer and financial consultant http://www.taperman.com

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