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Our View: The property amendments

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  • | 4:00 a.m. October 3, 2012
  • Sarasota
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Frederic Bastiat, the great French economic journalist of the 1840s, would be launching into tirades on talk radio today if he were asked to analyze the proposed constitutional amendments on Florida’s Nov. 6 ballot.

Milton Friedman, the late, great American economist, wouldn’t go into tirades. His personality wasn’t that way. Friedman instead would merely point out, in an even-toned way, the stupidity of the overall condition.

Bastiat, the author of “The Law,” a short book that should be required reading in all American schools, would say the proposed amendments demonstrate as most laws do that: “The law has been perverted by the influence of two entirely different causes: stupid greed and false philanthropy.”

And Friedman would say the 11 proposed amendments merely prove once again Friedman’s rule of laws, as he spelled out in his famous book, “Free to Choose”: That is, that well-meaning lawmakers create laws to right a perceived wrong for the benefit of a special group. Inevitably, though, these new laws almost always create unintended consequences that cause the well-meaning lawmakers to create more laws to right the unintended consequences of the first laws. And so on and so on. An endless train of laws.

Perverted laws, Bastiat would say. Laws perverted that make the plunder of others legal.

This is especially so when you look at the five proposed amendments that address property taxes — Amendments 2, 4, 9, 10 and 11. All of these amendments, if approved, either would confer special benefits on special groups or attempt to right the unintended consequences of previously approved laws.

To a degree, all of the amendments meet the crucial standard we require for “yes” votes on the amendments — that is, if approved they would increase Floridians’ individual freedom. Unfortunately, each amendment would increase freedom only for some Floridians because they will reduce taxes for special groups. (Lower taxation increases freedom.)

In other words, parts of these amendments, unfortunately, will create subsidies for a special few at the expense of the many. This is bad lawmaking — perverted but legal plunder, Bastiat would say. But as you will read below, the lawmakers who crafted these proposed amendments did so to create forced philanthropy for truly special groups — combat-wounded veterans; surviving spouses of deceased military veterans and first responders; and low-income seniors. How can you say “no” to them?

Veterans disabled due to combat injury; homestead property tax discount
Proposing an amendment to Section 6 of Article VII and the creation of Section 32 of Article XII of the state constitution to expand the availability of the property discount on the homesteads of veterans who became disabled as the result of a combat injury to include those who were not Florida residents when they entered the military and schedule the amendment to take effect Jan. 1, 2013.

Already a part of the state constitution is the law that gives a property-tax discount on homesteaded property owned and lived in by combat-wounded veterans age 65 or older who are partially or totally permanently disabled, were residents of Florida at the time of entering the military service and who were honorably discharged from the military.

The discount is a percentage equal to the percentage of the veteran’s service-connected disability as determined by the U.S. Department of Veterans Affairs.

Amendment 2 proposes to make a small change, but one that would significantly widen the number of eligible veterans and likely attract other combat-wounded veterans to Florida. Here’s the change: The amendment would remove the requirement that the veteran must have been a Florida resident at the time of entering the military.

This would allow any combat-wounded veteran age 65 or older and a property owner who resides permanently in Florida to receive an additional homestead exemption-property-tax break.

Typically, we are adamantly opposed to any government subsidies for any group. But veterans wounded in the protection of our nation are not just any group. They deserve this small benefit.
Recommendation: Yes.

Property-tax limitations; property-value decline; reduction for non-homestead assessment increases; delay of scheduled repeal.
Proposing amendments to Sections 4 and 6 of Article VII and Section 27 of Article XII and the creation of Sections 32 and 33 of Article XII of the State Constitution to allow the Legislature by general law to prohibit increases in the assessed value of homestead and specified non-homestead property if the just value of the property decreases, reduce the limitation on annual assessment increases applicable to non-homestead real property, provide an additional homestead exemption for owners of homestead property who have not owned homestead property for a specified time before purchase of the current homestead property, and application and limitations with respect thereto, delay the future repeal of provisions limiting annual assessment increases for specified non-homestead real property, and provide effective dates.

Lawmakers should be tarred, feathered and kicked in the rears for voting this proposed amendment onto the ballot. Florida judges in recent years routinely have removed proposed amendments from the ballot for violating the rule that restricts proposed amendments to one subject.

This one addresses four.

Yes, they’re all related to property taxes, but each part of the amendment relates to a different aspect of the current state constitution. What’s more, unless voters are inclined to research the details of each part — and most voters, in our view, are not likely to do so — there is a high likelihood voters won’t really understand what they are voting for or against or the consequences of their vote.

Perhaps the saving grace of this amendment is that if you read the amendment summary closely, it has key words that signal this amendment overall is a benefit to taxpayers and that it will limit government’s power to tax. Consider these key words and phrases:

• “… law to prohibit increases in the assessed value …”

• “… reduce the limitation on annual assessment increases …”

• “… provide an additional homestead exemption …”

• “… delay the future repeal … limiting annual assessment increases …”

So let’s translate each of the four parts:

Part 1: The first part of the amendment addresses a provision in the law that allows property appraisers to increase the assessed taxable value on your property even in times when the just value (or market value) declines — as occurred in many instances in the most recent recession.

For instance, say your home carried an assessed value of $500,000 and a market value of $600,000. Now say the recession dropped your market value to $570,000. You would think your assessed value would fall or stay the same. But Florida law allows property appraisers to increase the assessed value on homesteaded properties at the lesser of 3% or the CPI even when market values fall.

This amendment would stop that. It’s a benefit to taxpayers.

Part II: This would reduce the maximum allowable property-tax increase on non-homesteaded properties (i.e. all commercial buildings and snowbirds’ residences) from 10% to 5%.

Ever since the “Save Our Homes” amendment was adopted in 1992, this was one of gross inequities of that amendment. While the maximum assessment on homesteaded residences could be 3% per year, there previously was no limit on how high assessments could rise on non-homesteaded properties.

During the boom, snowbirds and commercial property owners almost rioted when they saw appraisers increase their annual taxable assessments 12%, 15% and higher.

Voters subsequently placed a 10% cap on the increase. This amendment proposes that cap be limited to a maximum increase of 5% on non-homesteaded properties.

This would be another boost to freedom and the Florida economy, improving the value and attractiveness of owning Florida real estate.

Part III: This portion of the amendment proposes a new tax benefit for full-time resident home buyers who have not received the homestead exemption in the three years prior to their purchase. The benefit: a homestead exemption equal to 50% of the market value of the purchased home (capped at the median market value of homes in the county). This exemption would be reduced 20% a year for five years.

In typical legislative fashion, this portion of the amendment confers a special unearned benefit on a small group of homebuyers. Obviously, it is designed to spur home buying, which would help the economy. But here again, it’s a lousy, unnecessary, perverted subsidy.

Part IV: The last part of this proposed amendment would extend from 2019 to 2023 the period property appraisers must limit increases in assessed values to no more than 5% on non-homestead properties. That’s a good thing.

State analysts estimate this amendment could cost taxing authorities up to $616 million in recurring lost revenues statewide. Either counties, municipalities and school districts would have to cut their spending; shift the burden to other taxpayers; or create a combination of cuts and shifts. What analysts do not estimate is how much new economic activity and tax revenues these savings would create.

Altogether, this amendment offers three fixes to unintended consequences of previous amendments, while at the same time it is negatively tainted by the perverted 50% tax-break for home buyers. The good (more freedom for taxpayers, more limits on government) outweighs the bad.

Recommendation: Yes.

Homestead property-tax exemption for surviving spouse of military veteran or first responder
Proposing an amendment to Section 6 of Article VII and the creation of Section 32 of Article XII of the state constitution to allow the Legislature by general law to provide ad-valorem homestead property tax relief to the surviving spouse of a military veteran who died from service-connected causes while on active duty or a surviving spouse of a first responder who died in the line of duty, provide definitions with respect thereto, and provide an effective date.

To argue against this amendment would be throwing yourself into the lion’s den. Unlike most subsidies, this would not be an unearned benefit.

However … the benefit should stop here. Knowing how lawmakers behave, it likely won’t. For now …


Tangible personal property-tax exemption
Proposing an amendment to Section 3 of Article VII and the creation of Section 32 of Article XII of the state constitution to provide an additional exemption from ad valorem taxes on tangible personal property valued at more than $25,000 but less than $50,000, to authorize a county or municipality to provide an additional exemption from ad valorem taxation for tangible personal property by ordinance as provided by general law and to provide an effective date.

If only this proposed amendment went all the way — completely eliminating Florida’s dreaded tangible personal-property tax. It’s one of the most-hated state taxes among Florida’s millions of small businesses.
We like what Lee County Property Appraiser Kenneth Wilkinson, author of the famous “Save Our Homes” amendment, told our sister paper, the Gulf Coast Business Review, about the tangible personal-property tax. He says it’s a form of double taxation. When a business owner in Florida buys equipment valued at more than $25,000, he pays a sales tax of 6% or 7% on the equipment and then must pay the tangible property tax annually thereafter.

Think of what this transfer of cash from the small business to the government does to the economy. Rather than allow the business access to that capital to invest in more productive equipment to grow its business and, presumably, create more jobs, instead that capital flows into and through the coffers of the government bureaucrats. They take their piece of that tax to pay themselves and then redistribute what’s left to administer some government program that typically is less efficient than the private sector. Here again, Bastiat would go crazy.

This proposed amendment easily meets our increased-freedom test. Lower taxes increases individual freedom.

Recommendation: Yes.

Additional homestead exemption; low-income seniors who maintain long-term residency on property; equal to assessed value
Proposing an amendment to Section 6 of Article VII of the state constitution to authorize the Legislature, by general law, to allow counties and municipalities to grant an additional homestead tax exemption equal to the assessed value of homestead property, if the property has a just value lower than a specified amount, to an owner who has maintained permanent residency on the property for a specified duration, who has attained age 65, and whose household income does not exceed a specified amount.

This amendment would give counties and municipalities the ability to eliminate the assessment of property taxes on homesteaded Floridians over age 65 who have maintained permanent residency in the state for 25 or more years, whose properties are assessed at less than $250,000 and whose household income is less than $27,030.

This is one of those tear-jerker, how-can-you-refuse benefits for low-income seniors. In colder terms it’s conferring another special exception to a special group.

Arguing against this is like saying let widows and orphans starve. The truth of the matter is this amendment, if approved, is not going to benefit many people. The Legislature’s Revenue Estimating Conference said if all Florida counties and municipalities enacted the measure (and they won’t), it might cost $9 million a year in lost property-tax revenue.

Recommendation: Yes.

The moral of these amendments is this: As long as we have elected lawmakers, we will have legal plunder, perverted taxation and constitutional amendments conferring benefits to a few via Florida’s property-tax laws. It’s enough to make you question the efficacy of property taxation to begin with.

Next week: Amendments 1, 3, 5, 8, 12


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