Property taxes

Several proposals for major changes in Florida’s state and local tax systems are now under discussion. The intense interest in taxes, and especially property taxes, arises from the interaction of Save Our Homes (SOH) and the recent housing boom.

Local governments in Florida are concerned that the same soaring house prices that have boosted their revenue base have also increased the wages they have to pay to attract a qualified work force, especially relative to similar local governments in many other states where the housing boom has been less remarkable. The doubling of Florida house prices over the past six years that increased local property tax revenue raises concerns that a shortage of affordable housing will undermine their efforts to recruit and retain employees.

In this report, we consider the accuracy and appropriateness of several aspects of the Florida Education Finance Program (FEFP) – the Florida Price Level Index (FPLI), the Sparsity Adjustment, and Discretionary Millage.

In recent years, numerous reports have analyzed Florida’s tax system and argued for change. Although these reports are useful in documenting the current situation, they tend to be one-dimensional—focusing only on the revenue side. In fact, state budgets reflect both revenues and services those revenues support, and thus analysis should take into account both elements—and the tradeoff between them. This analysis does just that, taking into account both taxes and the level of services they support.

The interaction between the Save Our Homes assessment limit and Florida’s housing boom created a property tax system riddled with inequities and inefficiencies. The inequities are obvious, and the newspapers are filled with examples: neighbors with similar houses but one paying twice the property tax of the other. A more subtle inequity is that Save Our Homes favors homesteaders over renters, who on average are less affluent. The inefficiencies are both economic and political.