35 Stetson L. Rev. 509 (2006)
INCREASING THE HOMESTEAD TAX
EXEMPTION: “TAX RELIEF” OR BURDEN ON FLORIDA HOMEOWNERS AND
LOCAL GOVERNMENTS?
Josephine W. Thomas*
I.
INTRODUCTION
In
2004, Florida ranked forty-fifth among the fifty states in terms of the state
and local tax burden imposed on its residents.1 This statistic should not
surprise anyone who is familiar with Florida’s constitutionally
imposed tax structure that provides for prohibitions against certain taxes and
exemptions from others.2 Floridians do not care to be taxed,3 and the
State’s Constitution reflects that sentiment.4
4.
© 2006, Josephine W. Thomas. All rights reserved. Editor in
Chief, Stetson Law
Review.
B.S. & WA., North Carolina State University, 2002; J.D., Stetson University
College of Law, 2006.
Many
thanks to the editors, staff, and advisors of the Stetson Law Review for your
hard work and dedication to this organization. I would like to especially thank
my publication editor, Paula Bentley, for her help and diligence in the editing
of this Comment, and Michael Sepe, the man behind the
curtain who is the most invaluable member of the Review. Finally, thank you to
Professors Brooke Bowman and Bridget Remington for your invaluable advice,
support, and guidance during this past year.
This
Comment is dedicated to my husband Todd, in appreciation of his endless
patience, love, encouragement, and laughter over the past three years.
1.
Helen Huntley, For Floridians, the Tax Burden Is Even Lighter, St. Petersburg Times
1A (Apr. 9, 2004). The Tax Foundation research organization in Washington, D.C.
ranks states according to the state and local tax burden imposed on their
residents. Id. In 2004, only Texas, Tennessee, Delaware, New Hampshire, and
Alaska imposed a lighter tax burden on their residents than Florida. Id.; see
also St. of Fla., Florida Quick Facts, Florida Taxes, http://www.stateofllorida.com.fPortalIDesktopDefault.aspx?tabid=95
(accessed Jan. 6, 2006) (discussing the Tax Foundation’s 2004
findings).
2.
See generally Fla. Const. art. VII (outlining Florida’s structure of
finance and taxation).
3.
Donna Blanton, The Taxation and Budget Reform Commission: Florida’s
Best
Hope
for the Future, 15 Fla. St. U. L. Rev. 437, 456-457 (1991) (noting that
“Floridians have participated in tax revolts in the past” and
that “[l]ocal tax revolts occur periodically
as local governments increase property taxes”).
4.
See Fla. Const. art. Vii, § 1(a), 9(a) (authorizing local governments
to levy only
[*510]
The homestead exemption is one such constitutional right that is deeply
ingrained in Florida’s history.5 The original purpose behind the
homestead exemption was to protect the family unit from losing its home during
times of economic hardship.6 Today, the Florida Constitution protects the
homestead by placing restrictions on transfer,7 allowing significant exemptions
from creditors’ claims,8 and providing for a $25,000 tax exemption on
the taxable value of a primary residence.9 This Comment will focus on part
three of the homestead equation, the $25,000 tax exemption, and its interplay
with the more recently passed Save Our Homes Amendment.10 While reducing the
property tax burden on permanent resident homeowners, the $25,000 tax exemption
has also removed billions of dollars from the State’s tax rolls each
year since its passage in 1980.11
the
property tax). In addition, counties, municipalities, and school boards cannot
levy more than ten mills. Fla. Const. art. VII, § 9(b). “A
‘mill’ is one-tenth of one cent,” or one dollar per
thousand; thus, ten mills equal one percent of the property value. Advisory Op.
to the Atty. Gen. re Additional Homestead Tax Exemption, 880 So. 2d 646, 652 n.
4 (Fla. 2004) [hereinafter Advisory Op. Additional Homestead] (citing
Black’s Law Dictionary 993 (Bryan A. Garnered., 6th ed.,
West 1990) and Fla. Stat. § 192.001(10) (2003)). The terms
“ad valorem taxation” and “property
taxation” are synonymous and will be used interchangeably throughout
this Comment. “Ad valorem taxation” means the taxation of
real property in proportion to its assessed value. James S. Wershow
& Edward S. Schwartz, Ad Valorem Assessments in Florida — Recent Developments, 36 U. Miami L. Rev. 67, 67
(1981). The Florida Constitution also limits the amount of increase in the
yearly assessed value of property, which will be discussed in more detail in
Part II.
5.
See generally John F. Cooper & Thomas C. Marks, Florida Constitutional Law
759 (3d ed., Carolina Acad. Press 2001) (discussing how Florida’s
constitutional homestead provisions have protected family homes from creditors
for more than a hundred years).
6.
Id. At 759-760.
7.
Fla. Const. art. X, §4.
8.
Id.
9.
Fla. Const. art. VII, § 4, 6; Fla. Const. art. X, § 4; see
also Donna L. Seiden, There’s No Place Like
Home(stead) in Florida — Should It Stay
That Way? 18 Nova L. Rev. 801, 803 (1994) (discussing the different components
that make up Florida’s homestead provision).
10.
Florida voters passed the Save Our Homes Amendment in 1992, and it is outlined
in Article VII, Section 4 of the Florida Constitution. The Amendment is
commonly referred to as the Save Our Homes Cap.
11.
Pamela M. Dubov, Student Author, Circumventing the
Florida Constitution: Property Taxes and Special Assessments, Today’s
Illusory Distinction, 30 Stetson L. Rev. 1469, 1474 (2001). For tax year 2004,
the $25,000 homestead exemption removed over $104 billion from statewide tax
rolls, a 2.45 percent increase over tax year 2003. Fla. Dept. of Revenue, 2004
Florida Property Valuations & Tax Data 9-10, tbl.
5 (Dec. 2004) (available at http://www.myflorida.com/dor/property)
[hereinafter 2004 Prop. Valuations]. The amount removed from the tax rolls
increased 2.47 percent from 2002 to 2003 and has consistently increased over
two percent every year since 1998. Id.; Fla. Dept. of Revenue, 2001
[*511]
In 2004, a political action committee registered under the name of Families for
Lower Property Taxes, Inc.12 proposed an amendment to the Florida Constitution
through a citizen initiative petition.13 The ballot summary for the proposed
amendment promised “property tax relief” to Florida
homeowners through an increase in the homestead tax exemption.14 Passing the
proposed amendment in the November general election would have raised the
homestead tax exemption from $25,000 to $50,000 for all qualifying Florida
homeowners.15 However, the amendment did
Florida
Property Valuations & Tax Data tbl. 5 (available
at http://www.myflorida.com/dor/property).
The student author of the comment cited in this footnote has served as the
Pinellas County Chief Deputy Property Appraiser for over fourteen years.
12.
Families for Lower Property Taxes, Inc. was spearheaded by Karen Saull, a Republican candidate for the United States Senate.
Sandi Martin, No Homestead Hike: Court
Strikes
Exemption Increase Proposal Because of Wording, http://www.polkonline.com/stories/071604/loc_hike.shtml(accessed
Jan. 6, 2006). Although much has been written about this particular group and
its motives behind proposing the increased homestead exemption amendment,
political action committees and their motives, including this group in particular,
are outside the scope of this Comment.
13.
Advisory Op. Additional Homestead, 880 So. 2d at 647. Citizen initiative
petitions are a way for citizens to amend a constitution without going through
the legislative process, and twenty-three state constitutions currently
authorize them, including Florida’s. Joseph F. Zimmerman, The
Initiative: Citizen Law Making 23 (Praeger 1999); see
also John F. Cooper, The Citizen Initiative Petition to Amend State
Constitutions: A Concept Whose Time Has Passed, or a Vigorous Component of
Participatory Democracy at the State Level? 28 N.M. L. Rev. 227, 260-263 (1998)
(noting that citizen initiative petitions were originally favored “as
a way for the common people to bypass corrupt legislators and activist judges”
so that the constitution would reflect the people’s concerns).
Recently the citizen initiative petitions have been increasingly criticized as
a way for wealthy special interest groups to promote their own agendas, thereby
serving the very special interests that the petitions were originally intended
to control. Id. At 260. For discussion of the difficulties of changing the
constitution through amendments and citizen initiatives at the national and
state levels, see Gerald Benjamin & Thomas Gais,
Constitutional Convention-phobia, 1 Hofstra L. &
Policy Symp. 53 (1996).
14.
Advisory 0p. Additional Homestead, 880 So. 2d at 647. The ballot summary in
2004 read as follows: “This amendment provides property tax relief to
Florida (homeowners] by increasing the homestead exemption on property
assessments by an additional $25,000.” Id. The proposed
amendment’s frill text provided that:
Article VII Section 6 of the Florida Constitution is
hereby amended to add the following paragraph (g). (g) By general law and
subject to conditions specified therein, effective for assessments for 2005 and
each year thereafter, an additional homestead exemption of twenty-five thousand
dollars shall be granted to any person who has the legal or equitable title to
real estate and maintains thereon the permanent residence of the owner.
Id.
15,
Id. For the purposes of the amendment, a qualifying homeowner would have been a
person who had legal or equitable title to real estate and who maintained his
or her permanent residence on that real estate. Id. In her concurring opinion,
Justice Quince explained that “[u]nder the
current homestead exemption provision, any person who holds
[*512]
not appear on the November 2004 general election ballot because the Florida
Supreme Court ruled that the text of the amendment was misleading to voters.16
Some local property tax appraisers and opponents of the proposed amendment
expressed their relief over the Court’s ruling,17 but the leader of
the political action committee pledged to continue working toward the goal of
raising Florida’s homestead exemption.18 In all likelihood, the
Florida
the
legal or equitable title to real estate and who maintains that real estate as
his or her permanent residence, ‘or another legally or naturally
dependent upon the homeowner,’ is allowed a certain tax
exemption.” Id. At 655 (Quince, J., concurring) (emphasis in original)
(citing Fla. Const. art. VII, § 6). Thus, according to Justice Quince,
the proposed amendment was misleading because the ballot summary did not
clearly explain the $50,000 exemption would not be available to all homeowners
who were currently eligible for the $25,000 exemption. Id.
16.
Id. At 653-654 (majority) (holding that the “summary flies under false
colors with a promise of “tax relief” and that
“[t]he use of the phrase ‘provides property tax
relief’ clearly constitutes political rhetoric that invites an
emotional response from the voter by materially misstating the substance of the
amendment” (emphasis added)). When a constitutional amendment is
proposed through a citizen initiative petition, the Attorney General can
petition the Florida Supreme Court “for an advisory opinion as to
whether the text of the proposed amendment complies with the single-subject
requirement of article XI, section 3, [of the] Florida Constitution, and
whether the ballot title and summary comply with the requirements of [Slection 101.161, Florida Statutes (2003).” Id. At
647. Section 101.161(1) states that the chief purpose of the amendment must be
explained in seventy-five words or less, which has been interpreted to mean
that the ballot title and summary cannot be misleading to the public. Advisory
Op. Additional Homestead, 880 So. 2d at 651 (citing Advisory Op. to the Atty.
Gen. re Right of Citizens to Choose Health Care Providers, 705 So. 2d 563, 566
(Fla. 1998)). The Court has repeatedly held that “[t]he basic purpose
of this provision is “to provide fair notice of the content of the
proposed amendment so that the voter will not be misled as to its purpose, and
can cast an intelligent and informed ballot.’” Advisory Op.
Additional Homestead, 880 So. 2d at 651 (citing Advisory Op. to the Atty. Gen.
re Fee on Everglades Sugar Prod., 681 So. 2d 1124, 1127 (Fla. 1996)); Advisory
Op. to the Atty. Gen. re Patients’ Right to Know about Adverse Med.
Incidents, 880 So. 2d 617, 621 (Fla. 2004) (citing Advisory Op. to the Atty.
Gen. re People’s Prop. Rights Amend. Providing Compensation for
Restricting Real Prop. Use May Cover Multiple Subjects, 699 So. 2d 1304, 1307
(Fla. 1997)). Thus, a misleading ballot summary would be one in which the
ballot did not “fairly inform the voter of the chief purpose of the
amendment” and in which “the language of the title and
summary, as written, misleads the public.” Advisory Op. Additional
Homestead, 880 So. 2d at 651 (citations omitted). In the homestead tax
exemption advisory opinion, the fact that the summary stated that “the
amendment will ‘provide property tax relief,’” when
in reality the amendment had no effect on local governments’ power to
raise tax rates, led the Court to conclude that the summary was misleading. Id.
At 653 (emphasis in original).
17.
E.g. Martin, supra n. 12 (quoting Polk County Property Appraiser Marsha Faux,
who expressed her relief that the amendment was not going to appear on the
ballot in 2004).
18.
Id. (quoting a written statement from Karen Saull,
head of Families for Lower Property Taxes, Inc., who “vow[edl to continue to carry the message of lower taxes and
fiscal responsibility to the people of Florida in the friture”).
[*513]
Supreme Court will again have to consider the text of a proposed amendment to
increase the homestead tax exemption.19 If such an amendment were to appear on
a general election ballot, it is likely that the amendment would pass, given
Florida voters’ reputation for anti-tax sentiments2¡ and history of
amending the Constitution.21
On
its face, increasing the homestead tax exemption sounds like an exciting
opportunity for property owners, who will read the text of the proposed
amendment and immediately anticipate paying lower property taxes.22 However, an
increase in the homestead tax exemption would have severe ramifications for
local governments, which depend on revenue from property taxes, and homeowners,
who may unwittingly impose hidden taxes and costs on themselves.23 Most
important to voters’ analysis of the issue is
19.
See Joni James, Man to Try Again to Double Property Tax Exemption, St.
Petersburg Times (S. Pinellas ed.) SB (Mar. 10, 2005) (stating that Families
for Lower Property Taxes “plans to draft a new initiative for the 2006
election that would amend the state Constitution to double Florida’s
$25,000 homestead exemption to $50,000 to save homeowners as much as $500 in
property taxes annually”); see also David Denslow
& Carol weissert, Tough Choices: Shaping
Florida’s Future 43 (Oct. 2005) (available at http://www.fsu.edu/~collins/materials/tough_choices.pdf)
(stating that “[t]hough the [amendment to
raise the homestead exemption] failed to make the ballot in 2004, it may well
do so soon and would be likely to pass”).
20.
Blanton, supra n. 3, at 455-457 (discussing Florida
“voter[s’] attitudes toward taxes”). A 2004 survey
of Florida residents reflected that Floridians are “leery of new
taxes... and are dissatisfied with the governmental output from their
taxes.” Denslow & Weissert,
supra n. 19, at 1-2.
21.
See Douglas S. Bailey, Florida’s Constitutional Ballot Initiatives: Is
This Any Way
to
Run Government? 5 (James Madison Inst. Policy Rpt. #39 May 2003) (available at http://www.jamesmadison.org/article.php/133.htm1)
(noting that the Florida Constitution has been amended fifty-eight times since
1968). Although the debate over whether the scope of constitutional amendments
should be limited is outside the focus of this Comment, it is worth noting that
citizens have passed constitutional amendments protecting pregnant pigs,
reducing classroom sizes, banning marine fishing nets, creating (and
subsequently abandoning) a high-speed rail system, mandating casino gambling,
and implementing smoking policies. Id. At 1, 5. The James Madison Institute is
an independent, non-profit, nonpartisan, Florida-based research and educational
organization whose “mission is to keep the citizens of Florida
informed about their government and to shape [the] state’s future
through the advancement of practical free-market ideas on public policy
issues.” James Madison Inst., About JMI, http://www.jamesmadison.org; select
About Us (accessed Jan, 6, 2006).
22.
Supra n. 16 (discussing the Florida Supreme Court’s recognition that
the ballot summary of the proposed amendment was misleading, and noting that
voters are apt to respond emotionally to property tax issues when at the
polls).
23.
Denslow & Weissert,
supra n. 19, at 24 (stating that “[tihe two
taxes that raise the most revenue for state and local governments in Florida
are the sales tax and the property tax”); Wershow
& Schwartz, supra n. 4, at 67 (stating that the primary revenue source for
[*514]
for voters to know and understand that the homestead exemption is not the
exclusive factor in determining property tax revenues. In addition to the
homestead tax exemption, the Save Our Homes Cap limits the yearly assessed
value of homestead property through the use of an acquisition-value taxation
system.24 In actuality, the homestead exemption and Save Our Homes Cap together
act as a “double whammy” to local government taxing
authorities, since Save Our Homes alone severely limits revenue-generating
ability.25 The same local governments, which are thereby limited in the amount
of revenue they can collect, are still expected to provide basic services such
as water, sewer, fire and rescue, roads, and other infrastructure. 26 In
addition, Florida’s dramatic population influx and building boom are putting
unprecedented stress on current infrastructure 27
local
governments in Florida is the property tax).
24.
Richard S. Franklin & Roi E. Baugher
III, Protecting and Preserving the Save Our Homes Cap, 77 Fla. B.J. 34, 34
(Oct. 2003). The Save Our Homes Cap provides that the yearly increase in
assessed value is limited to three percent, or the percentage change in the
consumer price index, whichever is less. Id. At 35. This type of taxation
system is referred to as “acquisition-value” taxation because
the assessed value of the property is based upon the property’s value
when it was purchased, or acquired, by the current owner. Mary LaFrance,
Constitutional Implications of Acquisition-Value Real Property Taxation: The
Elusive Rational Basis, 1994 Utah L. Rev. 817, 817 (1994).
25.
See Franklin & Baugher, supra n. 24, at 34
(stating that the Save Our Homes Cap alone prevented over $47.9 billion in
assessed property value from being taxed in 2001). In 2002, the amount
protected from taxation was approximately $80 billion, representing a 68.5
percent increase over 2001. Id.
26.
Melissa J. Morrow, Student Author, Twenty-Five Years of Debate: Is
Acquisition-Value Property Taxation Constitutional? Is It Fair? Is It Good
Policy? 53 Emory L.J. 587, 590, 593 (2004) (discussing the incompatible
objectives of local governments, which provide basic public services such as
police and fire protection, education, public safety, and recreation facilities
that are financed through the collection of real property taxes, and residents,
who do not like paying property taxes and expect high levels of service); see
also Leroy Collins Inst., Facing Florida’s Revenue Shortfall 11-12, 30
(Oct. 2005) (available at http://www.fsu.edu/~collins/materials/tough_choices.pdf)
(finding that with an enrollment growth of 50,000 students each year in
Florida’s schools, “it takes $400 to $800 million in state
funds each year just to stay even with serving the additional
students,” yet fifty-three percent of Floridians would like to see tax
and spending levels in the area of K-12 education remain unchanged).
27.
From 1990 to 2000, Florida experienced a 23.5 percent increase in population,
the seventh highest in the country, whereas the United States as a whole
experienced only a 13.1 percent increase in population. U.S. Census Bureau,
United States: Population, Percent Change, 1990-2000, http://quickfacts.census.gov/qfd/rankings/PL0120000r.html
(accessed Jan. 6, 2006). According to a report on Florida Tax and Spending
Policy from the Leroy Collins Institute, an independent, non-profit, and
non-partisan organization located at Florida State University in Tallahassee,
“Florida is in the midst of a housing boom unlike any the state has
experienced since the 1920s,” and from the years 1996 to 2004,
[*515]
Recognizing that the objectives of local governments and property owners differ
regarding the assessment and collection of property taxes, how does Florida
reconcile the historical and intended purpose of the homestead exemption with
the current needs of local governments? Furthermore, how does the Save Our
Homes Cap fit into the picture? Aside from the historical purpose of protecting
the family home,28 a more modern goal of the constitutional tax exemption is to
combine the homestead exemption with the Save Our Homes Cap to help prevent
lower-income residents from losing their homes because they cannot afford to
pay their tax bill, especially in times of rapidly appreciating property
values.29 On the other hand, Florida, as one of the lowest-taxing states in the
country, does not ask much of its citizens in the way of paying taxes.30 While
Florida residents have always had a strong anti-tax sentiment, residents also
want government to fund basic services to which they have grown accustomed.31
The result is a Florida Constitution that giveth and taketh away — local
governments have the power to levy property taxes in order to provide for
infrastructure, yet citizens can constitutionally limit the amount of revenue
local governments can collect.32
housing
“prices rose by 70 percent, compared to 50 percent
nationally.” Leroy Collins Inst., supra n. 26, at 6. In addition, the
study found that “[w]hat is pretty clear is that through some
combination of low tax revenues and impact fees that don’t have growth
truly paying for itself, Florida has dug itself into a deep hole on basic
infrastructure.” Id. At 19.
28.
Cooper & Marks, supra n. 5, at 759.
29.
See Smith v. Welton, 729 So. 2d 371, 373 (Fla. 1999)
(stating that “the [Save Our Homes amendment was designed to ensure
that citizens on fixed incomes will not lose their homes on the tax block due
to the rising value of Florida property”); Morrow, supra n. 26, at
596-597 (discussing the fact that “acquisition-value taxation removes
the fear of uncontrollable appreciation” from “cash-poor
homeowner[s] [who] may not be able to afford [their property] taxes if their
property is assessed at fair market value”).
30.
State of Flu., supra n. 1; see also Denslow & Weissert, supra n. 19, at 1 (noting that “Florida
is a low-tax, low expenditure state, even compared to other Southern
states,” as well as “a growing state with a highly mobile
population”); Blanton, supra n. 3, at 443-447 (discussing the fact
that Florida is one of the few states that does not impose a personal income
tax, is a “low tax, high growth state,” and depends heavily
on the sales tax for its tax base).
31.
Tampa Mayor Pam Iorio, when discussing the proposed
homestead exemption increase, commented that most people “like having
that park down the street. They like having the police come. They like having
the fire department arrive on the scene. That’s why they’re
paying these taxes.” Jerome R. Stockfisch,
Property Tax Pickle, Tampa Trib. At Nation/World 1 (June 21, 2004).
32.
Compare Fla. Const. art. WI, § 9(a) (stating that “[clounties, school districts, and municipalities shall, and
special districts may, be authorized by law to levy ad valorem taxes”)
with Fla. Const. art. WI, § 4(e)(1)(A)-(B) (amended 1992) (stating
that “changes in
[*516]
The purpose of this Comment is to demonstrate the negative consequences to
local governments and Florida property owners that will occur if the homestead
exemption is increased while the Save Our Homes Cap continues in its current
form. The Florida Legislature and Florida voters must see through the immediate
gratification of appeasing the masses by way of a proposal of supposed
“tax relief,” and closely examine the effect that cutting
local tax revenues will have on the ability of counties, cities, and
municipalities to provide basic infrastructure services such as water, sewer,
law enforcement, rescue services, schools, and parks and recreation. As long as
the Save Our Homes Cap remains in effect and continues to limit the annual
assessed value of homestead real property to three percent or less, an increase
in the homestead tax exemption has no place in the Constitution.
A
reduction in revenues to local taxing authorities will simply cause a shift in
revenue generation as those same entities implement alternative means of
collecting revenue, some of which may not be constitutional.33 In turn, the
“tax relief” afforded to certain residents in the form of an
increased homestead exemption may be completely negated or exceeded by the
imposition of special assessments or impact fees.34 In addition, an increased
homestead exemption working in conjunction with the Save Our Homes Cap could
re-ignite equal protection debates and lawsuits regarding the State’s
disparate treatment of certain classes of homeowners.35 Finally, there are
public policy concerns that must be considered, especially in light of
Florida’s sales-and service-based economy.36 Florida voters should not
decide to petition and vote for “tax relief” through
rose-colored lenses; rather, voters should determine whether it is even
feasible for the Save Our Homes Cap and the homestead tax exemption to continue
to coexist.37
assessments
shall not exceed the lower of ... [t]hree percent
(3%) of the assessment for the prior year” or “[t]he percent
change in the Consumer Price Index.., for the preceding calendar
year”). The Constitution also provides for the $25,000 homestead
exemption as well as a millage rate limitation often mills. Fla. Const. art.
VII, §* 6, 9(b).
33.
Infra pt. IV(B) (discussing alternative sources of local government funding).
34.
Infra pt. W(B)(i) (explaining the use of special assessments
and impact fees).
35.
Infra pt. IV(A) (discussing the equal protection debate).
36.
Infra pt. V (setting forth the policy implications of an increased homestead
exemption).
37.
Infra pts. IV-VI (analyzing the impact of an increased tax exemption and
proposing alternatives to Florida’s current tax structure).
[*517]
Following a brief introduction to the history of and constitutional challenges
to the homestead exemption and Save Our Homes Cap in Florida, Part III of this
Comment will examine the financial consequences to local governments should the
homestead exemption increase and discuss the current constitutionally imposed
limitations on tax revenue generation. Part IV will then critically analyze the
impact of this proposed amendment on select groups of people and present
alternative revenue sources that local governments may utilize to recoup lost
revenue. Parts V and VI of this Comment will then discuss the public policy
implications of an increased homestead exemption and propose alternatives to
the current property tax structure in Florida.
H.
HISTORY OF THE HOMESTEAD EXEMPTION AND LIMITATIONS ON ASSESSED VALUE OF
HOMESTEAD PROPERTY
Although
the homestead exemption enjoys a much longer history in the Florida
Constitution than the Save Our Homes Cap, both provisions have endured
constitutional challenges during their respective tenures.38 Part A will
examine the evolution of the homestead exemption, and Part B will discuss the
more recent passage of the Save Our Homes amendment.
A.
Florida’s Homestead Exemption
The
homestead exemption has a deep-rooted history in Florida constitutional law.39
Although most Florida homeowners today likely equate the term
“homestead property” with receiving a $25,000 tax exemption,
the tax exemption is only one aspect of homestead and is not the original
purpose or meaning of the term.4¡ The homestead provisions first appeared in
the 1868 Con-
38.
Infra pt. WA)-(B).
39.
Cooper & Marks, supra n. 5, at 759; see also Seiden,
supra n. 9, at 823 (noting that “the [homestead] exemption is over 200
years old”).
40.
Rohan Kelley & Tae Kelley Bronner,
Homestead and Exempt Personal Property, in Practice under Florida Probate Code
§ 19-1, 19.2 (Fla. B. 2002). Some of the purposes for which real
property may be a homestead are:
[e]xemptioa from forced sale (except for certain types of
debts) while the homesteader is living; [e]xemption
from forced sale (except for certain types of debts) after death of the
homesteader; [l]imitation on inter vivos alienation;
[Ilimitation on testamentary disposition; [and]
[l]imitation on disposition by inter vivos trust as a
will
[*518]
-stitution, and they were intended to prevent
families from losing their homes and farms after the end of the Civil War.41
Florida was a family-focused state and did not want to risk families or their
heirs losing their homes because of unpaid debts.42 In addition, courts have
noted that public policy favors laws protecting homestead, because these laws
“promote the stability and welfare of the state by encouraging
property ownership and independence on the part of the citizen and by
preserving a home where the family may be sheltered and live beyond the reach
of economic misfortune.
In
1968, Florida voters adopted the current form of the Constitution after the
Constitution Revision Commission recommended revisions to the Constitution of
1885. Reflecting voters’ anti-tax sentiment, the current Constitution
provides for no imposition of state property taxes on real or tangible personal
property.45 However, the Constitution does provide that local government
authorities — specifically counties, school
districts, and municipalities — are allowed
to collect property taxes, and may collect additional taxes when granted
authority to do so by the Legisla-
Id.
41. Id. At § 19.14. Regarding the purpose
behind the homestead exemption, the Florida Supreme Court has stated,
“As a matter of public policy, the purpose of the homestead exemption
is to promote the stability and welfare of the state by securing to the
householder a home, so that the homeowner and his or her heirs may live beyond
the reach of financial misfortune and the demands of creditors who have given
credit under such law.” Pub. Health Trust of Dade County v. Lopez, 531
So. 2d 946, 948 (Fla. 1988).
42. Kelley & Bronner,
supra n. 40, at § 19.14.
43. Reinish v. Clark, 765
So. 2d 197, 206-207 (Fla. 1st Dist. App. 2000) (citations omitted).
44. Dubov, supra n. 11, at
1471. A Constitutional Revision Commission is provided for in the 1968
Constitution and meets every twenty years to review and recommend changes to
the Constitution. Fla. Const. art. XI, § 2; Benjamin & Gais, supra n. 13, at 74. The Commission has the power to
make recommendations for constitutional changes directly to the people, who
then vote whether to accept or reject the proposals. Fla. Const. art. XI,
§ 5; Benjamin & Gais, supra n. 13, at
74. In 1978, Floridians rejected the recommendations of the very first Revision
Commission. Benjamin & Gais, supra a. 13, at 74.
The commission’s second convention in 1998, described as “the
first successful utilization of the full commission mechanism,”
accomplished several important revisions to Florida’s Constitution.
Robert F. Williams, Foreword: Is Constitutional Revision Success Worth Its
Popular Sovereignty Price? 52 Fla. L. Rev. 249, 250, 252 (2000).
45. Fla. Const. art. VII, § 1(a). Article
VII, section 1(a) of the Florida Constitution provides that “[n]o tax
shall be levied except in pursuance of law. No state ad valorem taxes shall be
levied upon real estate or tangible personal property. All other forms of
taxation shall be preempted to the state except as provided by general law.”
[*519]
-ture.46 The 1968 Constitution also establishes exemptions from property
taxation.47 One example is a $5,000 exemption for property on which the owner
maintains his or her permanent residence.48 In 1980, voters approved an
amendment to the Constitution to raise the tax exemption to $25,000.49 Today,
the homestead exemption is addressed not only in the Florida Constitution, but
in the Florida Statutes as well.50
Constitutional
challenges to the homestead tax exemption have helped to shape its current state.
The increased exemption from $5,000 to $25,000 in 1980, and the subsequent loss
of revenue to local taxing authorities, concerned the Legislature enough that
it incorporated an extended residency requirement into the exemption’s
statutory framework.51 The Legislature imposed the condition that the $25,000
exemption was only available to residents who had maintained their permanent
residence in Florida
46.
Id. At § 9(a) (declaring that “[c]ounties,
school districts, and municipalities shall, and special districts may,... be
authorized by general law to levy other taxes, for their respective purposes,
except ad valorem taxes on intangible personal property and taxes prohibited by
this constitution”).
47.
Id. At § 3. In addition to the homestead exemption, the Constitution
also establishes exemptions for other types of property, such as property used
predominantly for religious, charitable, educational, or scientific purposes.
Id.
48.
Id. At § 6(a).
49.
See id. At § 6(c)-(d) (increasing the value of the homestead exemption
to $25,000). Ironically, the 1980 increase to $25,000 was prompted by concern
about inflation and the fear that Florida voters could pass a provision similar
to Proposition 13 in California, which severely limited increases in assessed
value to two percent per year. Osterndorf v. Turner,
426 So. 2d 539, 541 n. 1 (Fla. 1982). In 1992, Florida voters passed a
provision similar to Proposition 13 anyway, today known as the Save Our Homes
Cap. Franklin & Baugher, supra n. 24, at 34. For
more discussion of Proposition 13 and its consequences, see infra Part 11(B).
50.
Several Florida statutes serve as the framework to implement the constitutional
homestead requirement. See Fla. Stat. § 196.031 (providing for
exemptions of homesteads); Fla. Stat. § 196.075 (providing for
additional homestead exemptions for persons sixty-five or older); Fla. Stat.
§ 196.192 (providing for exemptions from ad valorem taxation).
51.
Osterndorf, 426 So. 2d at 542 (referring to Section
196.031(3)(d)-(e) of the 1982 Florida Statutes, which imposed a five-year
residency requirement on homestead exemption entitlement); see also Henry K van
Assenderp & Andrew I. Solis, Dispelling the
Myths: Florida’s Non-Ad Valorem Special Assessments Law, 20 Fla. St.
U. L. Rev. 825, 837 (1993) (discussing the Florida Taxation and Budget Reform
Commission’s study of the 1980 increase in the homestead exemption
from $5,000 to $25,000. According to the 1991 study, the increase in the homestead
exemption had “to some extent, undermined the viability of the
property tax as the major revenue source for local government, especially in
areas experiencing slow economic growth.”) (citing Fla. Taxn. & Budget Reform Commn.,
Florida’s Fiscal Future: Balancing Needs and Taxes 34 (1991)).
[*520]
for five consecutive years prior to filing for the exemption.52 In Osterndorf v. Turner,53 the plaintiffs challenged the
exemption on the grounds that the length-of-residency requirement was unconstitutional.54
The Florida Supreme Court held that the residency requirement created two
different classes of homeowners, thus rendering it unconstitutional, and that
all permanent residents of Florida were entitled to the $25,000 exemption
regardless of how long they had resided in the State.55
52.
Osterndorf, 426 So. 2d at 542 (citing Fla. Stat.
§ 196.031(3)(d)-(e) (1982)). The Legislative bases behind the
conditional residency --according to an affidavit filed by the State during
litigation — were four-fold. First, the
Legislature reasoned, “new residents have an immediate fiscal impact
upon local government’s capital outlay and should pay their own share
of [the] tax burden.” Second, “tax savings should be passed
on to longer term residents who have in recent years contributed tax dollars
that have created a revenue surplus and made the increased tax exemption
possible.” Third, “the statute would discourage fraudulent
homestead exemption applications.” Finally, “the statute
would avoid the possibility of excessive immigration of individuals who desire
lower taxes but are in need of many governmental services if Florida became too
much of a tax haven.” Id.
53.
426 So. 2d 539 (Fin. 1982).
54.
Id. At 540, 542. The trial court actually found in favor of the tax collector,
using a rational basis test, “concluding that the right to receive an
increased ad valorem tax exemption was neither a fundamental right guaranteed
by the United States Constitution nor a basic necessity of life, the denial of
which penalizes the exercise of the constitutional right to travel.”
id. At 542. Florida’s Fifth District Court of Appeal agreed that the
statute was valid, finding that “the reasons expressed by Speaker Haben supplied a rational basis for the state to impose
this durational residency requirement” and that the “language
of the constitutional provision granting the enhanced exemption gave the
legislature the authority to establish this type of durational residency
requirement.” id. At 542-543. However, in analyzing whether the
statute violated the Equal Protection Clause of the Florida Constitution,
federal cases that addressed durational residency requirements as conditions of
receiving benefits persuaded the Florida Supreme Court to hold the statute
unconstitutional. Id. At 543-544.
55.
Id. At 544-546. The Florida Supreme Court considered numerous federal cases in
its equal protection analysis, including Shapiro v. Thompson, 394 U.S. 618
(1969), in which the United States Supreme Court held that a one-year residency
requirement as a condition for receiving welfare benefits was unconstitutional
because the requirement “would logically permit the State to bar new
residents from schools, parks, and libraries or deprive them of police and fire
protection,” and “would permit the State to apportion all
benefits and services according to the past tax contributions of its
citizens.” Id. At 543 (citing Shapiro, 394 U.S. at 632-633). The
Florida Supreme Court also considered Dunn ii. Blumstein, 405 U.S. 330 (1972),
in which a one-year residency requirement was unconstitutional because it
“was not necessary to further a compelling state interest.”
Id. In Dunn, the United States Supreme Court found that there is a
“difference between bona fide residency requirements and durational
residency requirements, and [therefore] ‘durational residence
requirements, representing a separate voting qualification imposed on bona fide
residents, must be separately tested by the stringent standard’ of
being necessary to promote a compelling governmental interest.” Id.
(emphasis in original) (citing Dunn, 405 U.S. at 344). Very important to the
Florida Supreme Court’s analysis was Zobel
v. Williams, 457 U.S. 55 (1982), in which the Alaska legislature attempted to
distribute annual
[*521]
The most recent and most notable challenge to the homestead tax exemption came
in 2000 in Reinish v. Clark.56 The plaintiffs were
Illinois residents who owned real estate in Palm Beach County, where they
resided for four to five months each year.57 The plaintiffs challenged the
homestead exemption under the Equal Protection Clause, the Privileges and
Immunities Clause, and the dormant Commerce Clause of the United States
Constitution, alleging that the disparity in treatment between resident
taxpayers and non-resident taxpayers violated their constitutional rights.58
Addressing the homeowners’ equal protection argument, the First
District Court of Appeal cited to the Supreme Court for its statement that
“[tihe Equal Protection Clause does not
forbid classifications” of people but merely “keeps
governmental decisionmakers from treating differently
persons who are in all relevant respects alike.“59 In a lengthy
opinion, the court affirmed the trial court’s dismissal of the
plaintiffs’ complaint, holding that the Florida homestead tax
exemption did not violate the plaintiffs’ constitutional rights.60
dividends
from the state’s mineral income to residents based on length of
residency. Id. At 543-544, “Alaska attempted to justify the residency
distinction on the basis that it was a reasonable state objective to reward
citizens for past contributions.” Id. At 544. The United States
Supreme Court held that Alaska’s objective was “not a
legitimate state purpose,” and “Alaska’s reasoning
could open the door to state apportionment of other rights, benefits, and
services according to length of residency,” which “would be
clearly impermissible.” Id. (citing Zobel,
457 U.S. at 63-64). In addition, “five justices believed that the
Alaska scheme was unconstitutional as infringing upon the right to travel, in
violation of the privileges and immunities clause.” Id.
56.
765 So. 2d 197 (Fla. 1st Dist. App. 2000).
57.
Id. At 201.
58.
Id.
59.
Id. At 203 (citing Nordlinger v. Hahn, 505 U.S. 1, 10
(1992)). Under the equal protection claim, the plaintiffs alleged that by
denying them the homestead exemption only because they were out-of-state
residents, the homestead provision created an arbitrary and discriminatory
classification or distinction of residents that was unconstitutional under the
Fourteenth Amendment. Id. The court held that the Florida exemption treated the
plaintiffs the same as any other Florida residents who rented property or
“use[d] Florida real property as a secondary, seasonal, or vacation
residence.” Id. At 203-205.
60.
Id. At 201. The plaintiffs’ privileges and immunities claim alleged
that the financial burdens that non-resident property owners faced in
comparison to resident property owners infringed upon their rights to
interstate travel and property ownership. Id. At 207, 209. In dismissing this
claim, the court held that the State had a valid objective in protecting the
financial ability of taxpayers to maintain a primary shelter, and that a
secondary or vacation home did not implicate the same policy concerns as
providing for a safe and stable primary residence. Id. At 210. The court also
reasoned that the “homestead tax exemption was not designed to protect
all types of real property” and that the homestead exemption did not
preclude non-residents from purchasing Florida real property or moving
[*522]
Florida voters passed the Save Our Homes constitutional amendment in the 1992
general election.61 Similar to Proposition 13, which California enacted in the
late 1970s, Save Our Homes limits the amount of yearly increase in the assessed
value of homestead property.62 The Save Our Homes Cap has faced several
constitutional challenges during its short tenure, and so far has managed to
survive, perhaps because of the previous unsuccessful challenges to California’s
Proposition 13.63
In
1991, the Florida Supreme Court issued an opinion to the Florida Attorney
General that the proposed Save Our Homes amendment did not violate the
single-subject rule of the Florida Constitution and was not misleading to voters;
thus, the amendment appeared on the 1992 general election ballot.64 That same
year, the Florida League of Cities65 and the Florida Association of
to
Florida to live and work if they wished. Id.
Finally,
the plaintiffs alleged that the homestead exemption violated the dormant
Commerce Clause because it created taxes that unduly burdened interstate
commerce and imposed a tariff on Florida property owners whose primary
residence was in another state. Id. At 211-212: The court held that
“the homestead tax exemption is not per se discriminatory against
interstate commerce, for the provisions do not treat local and interstate
commerce differently.” Id. At 214. In conclusion, the court ruled that
the homestead exemption “is an even-handed regulation that promotes
the legitimate, strong public interest in promoting the stability and
continuity of the primary permanent home.” Id. At 215.
61.
Franklin & Baugher, supra n. 24, at 34-35.
62.
Id. At 34, 37. In Florida, the Save Our Homes Cap limits the yearly increase in
assessed value of homestead property to three percent, or the percentage change
in the consumer price index, whichever is less. Id. At 35. In addition, under
the recapture rule, all homestead property assessed below full market value
must be raised by three percent or the change in the consumer price index,
regardless of whether the property’s value increased during that
calendar year. Id. At 36.
63.
See Morrow, supra n. 26, at 604 (noting that the United States Supreme Court ultimately
upheld the constitutionality of Proposition 13 in Nordlinger,
holding that “Proposition 13 was “enacted precisely to
achieve the benefits of an acquisition-value system,” although the
Court did acknowledge the disparities that exist in such a system (citations
omitted)).
64.
Advisory Op. to the Atty. Gen. re Homestead Value Limitation, 581 So. 2d 586,
588 (Fla. 1991). “The single-subject requirement of article XI,
section 3 of the Florida Constitution” calls for proposed amendments
to “‘embrace but one subject and matter directly connected
therewith.’” Id. at 587 (citing Fla. Const. art. XI,
§ 3). To satisfy this requirement, “the proposed amendment
must have ‘a logical and natural oneness of
purpose.’” Id. (quoting Fine v. Firestone, 448 So. 2d 984,
990 (Fin. 1984)).
65.
The Florida League of Cities, formed in 1922, is a league composed of Florida
municipalities and other units of local government. Fla. League of Cities,
Inc., About the League, http://www.flcities.com/abouttheleague.asp
(accessed Jan. 20, 2006). Currently, 404 of Florida’s 408
municipalities are voluntary members of the league. Id. “The aim of
[*523]
Counties66 jointly challenged the Save Our Homes provision under the claim that
the imposition of Save Our Homes would trigger a “repealer”
in the homestead exemption provision.67 The constitutional provision that
includes the homestead protection also includes language providing for a repeal
of a portion of the $25,000 exemption if voters approve an amendment that
“provides for the assessment of homestead property at a specified
percentage of just value.”68 The plaintiffs alleged that approval of
the Save Our Homes amendment would meet the criteria to trigger the repealer.69
In a highly divided opinion,70 the Florida Supreme Court held that the plain
language of the Save Our Homes amendment did not trigger the repealer.71
the
Florida League of Cities is to promote local self-government and serve the
municipal governments in Florida,” which includes providing
“advocacy at both the state and federal levels, increasing public
knowledge of municipal services and issues, providing municipal officials with
training and technical assistance, and providing cost-effective programs and
products to local governments.” Id. At http://www.flcities.com/what_we_do.asp.
66.
The Florida Association of Counties (FAC) was formed in 1929 and its membership
consists of Florida’s sixty-seven counties as well as
“appointed county officials including administrators/managers,
attorneys[,] and other professional county government personnel.” Fla.
Assn. of Counties, FAC Information, http://www.fl-counties.com/facinformation
.htm (accessed Jan. 20, 2006). FAC’s mission
is:
[Tlo preserve and promote
democratic principles by working to keep appropriate authority at the level of
government closest to the people, and to increase the capacity of Florida
counties to effectively serve and represent the citizens of the state through
legislative action, education of public officials, and enhancement of public
awareness about the role and functions of county government. Id.
67.
Fla. League of Cities v. Smith, 607 So. 2d 397, 398 (Fla. 1992).
68.
Id. The “repealer” section referenced in the Florida
Constitution is in Article VII, subsection 6(d), and provides the homestead
exemption would be repealed “on the effective date of any amendment to
section 4 [of Article VIII which provides for the assessment of homestead
property at a specified percentage of its just value.” Id.
69.
Id.
70.
Justice Kogan delivered the opinion of the Court,
with Justices McDonald and Harding concurring. Id. At 398, 401. Then-Chief
Justice Barkett concurred specially in a separate
opinion. Id. At 401. Justice Overton dissented in a separate opinion, in which
Justices Shaw and Grimes concurred, and Justice Grimes dissented in a separate
opinion, in which Justice Overton concurred. Id. The dissenting justices were
forthcoming about their frustration with constitutional amendment cases, with
Justice Overton stating, “I am continually troubled that this Court is
placed in the position of determining at the last minute the validity of
proposed constitutional amendments .... There has to be a better way to address
this type of issue at an earlier time. This case illustrates my
frustration.” Id. (Overton, J., dissenting).
71.
Id. At 400 (majority). The Court held that the repealer
was not triggered because Save Our Homes was a variable cap that would never
apply to all homestead property at any given moment. Id. However, Justice
Grimes disagreed with the majority, stating that
[*524]
The most recent case to challenge the Save Our Homes Cap was in 2004. In Zingale v. Powell,72 the homeowners resided in their home
for eleven years before applying for homestead exemption.73 Because of rapidly
increasing property values, the homeowners’ property taxes increased
by almost $40,000 from 2000 to 2001. The homeowners applied for the homestead
exemption in September 2001 and were subsequently approved, but they also
sought to apply the Save Our Homes Cap to limit the increase in their assessed
value from 2000 to 2001. The Florida Supreme Court held that the baseline
assessment for Save Our Homes is to be determined the year in which a
successful application is submitted and approved; therefore, the property
owners’ baseline
with
respect to some homesteads, an “assessment of homestead property at a
specified percentage of its just value... is exactly what will occur.”
Id. At 404 (Grimes, J., dissenting). Justice Grimes believed that “[ut is illogical to conclude that the repealing sentence of
section 6(d) only becomes activated by an amendment which requires an
across-the-board reduction in homestead assessments.” Id.
72.
885 So. 2d 277 (Fla. 2004).
73.
Id. At 279-280. It should be noted that a homeowner is eligible to apply for
homestead status immediately after the purchase of a property and can do so by
visiting the local property appraiser’s office. Pinellas County
Property Appraiser, http://pao.co.pinellas.fl.us/HowDoI.html
(accessed Jan. 6, 2006). In addition, many county property appraisers now have
online resources to assist residents in filing for homestead status and to
answer questions about tax exemptions and Save Our Homes. E.g. id.; Leon County
Property Appraiser, http://www.co.leon.fl.us/propappr/faq.cfm#Exemptions
(accessed Jan. 10, 2006); Miami-Dade County Property Appraiser, http://www.co.miami-dade.fl.us/pa/exemptions
.asp (accessed Jan. 10, 2006). The Florida Department of Revenue also
maintains a web-site with up-to-date information on Save Our Homes, as well as
contacts for all local property appraisers’ offices. Fla. Dept. of
Revenue, Florida Property Appraisers, http://www.myflorida.com/dor/property/appraisers.html
(accessed Jan. 20, 2006); Fla. Dept. of Revenue, Florida Property Tax Valuation
& Income Limitation Rates, http://dor.myflorida.com/dor/property/limitations.html
(accessed Jan. 20, 2006).
74.
Zingale, 885 So. 2d at 280.
75.
Id. Zingale, the county property appraiser, and
others appearing as amici, “assert[ed] that a homeowner’s entitlement to the benefits
of the cap in article WI, section 4(c) [of the Florida Constitution] is
dependent upon establishing the right to a homestead exemption under article
WI, section 6 ‘in the manner prescribed by law,’ i.e., by
timely application for a homestead exemption.” Id. At 282 (quoting
Fla. Const. art. WI, § 6). Zingale and his amici also argued that the property appraiser can only
determine whether property is homestead property, and thus eligible for the
Save Our Homes Cap, if the homeowner applies for and obtains the homestead
exemption. Id. The plaintiff homeowners, on the other hand, argued that the
constitutional provision only required them to establish the eligibility
requirements for homestead, not the application for exemption, to qualify for
the Save Our Homes Cap. Id. They argued, therefore, that the Save Our Homes Cap
should apply retroactively to the year in which the homestead eligibility
requirements were met, not when the application was filed. Id.
[*525]
should be based on its 2001 assessed value.76 The Court’s decision was
significant because, after Zingale, new homeowners
must file and be approved for the homestead exemption by March 1 of a tax year
in order to trigger the Save Our Homes baseline assessment for that year.77 If
the homeowner delays filing and is not approved until the following calendar
year, the property’s assessed value will be the market value of the
property on January 1 of the year in which the homeowner is approved.78 For new
purchasers in counties that are experiencing rapid increases in property
values, a delay in filing can potentially increase tax liability by thousands
of dollars.
The
extreme difference in tax liability based on the purchase date of a property is
one of the reasons why voters are likely to respond favorably to a
constitutional amendment to increase the homestead tax exemption. Although
increasing the exemption may provide temporary relief to the coffers of certain
homeowners, local governments and property owners will bear the burden of replacing
lost revenue in the long run.
III.
A NUMBERS GAME — WHY INCREASING THE
HOMESTEAD EXEMPTION MERELY SHIFTS RATHER THAN ELIMINATES THE TAX BURDEN
To
understand the budget pressures that local governments will face if the
homestead exemption is increased, it is important to consider
Florida’s infrastructure concerns, as well as the current
constitutional limitations on how much tax revenue local governments can
collect.
76.
Id. At 285. Concluding that “a successful application for a homestead
application is necessary both to obtain the exemption and to qualify for the
cap,” the Florida Supreme Court stated that “this
construction [of the amendment] facilitates a logical, orderly scheme that is
entirely consistent with the purpose of the amendment”; imposes
“only a slight burden on the taxpayer in comparison to the tax benefit
received”; and also “prevents substantial uncertainty in
taxing authorities’ annual taxing and budgeting process.” Id.
77.
Interview with Pamela M. Dubov, Pinellas County Fla.
Chief Dep. Prop. Appraiser (Aug. 2005) (notes on file with Author).
78.
Id.; see also Pinellas County Prop. Appraiser, Save Our Homes, http://pao.co.pinellas.fl.us/soh.html
(accessed Jan. 20, 2006) (explaining the Save Our Homes amendment and how the
cap works when property is sold).
[*526]
A. Revenue Lost If the Homestead Tax Exemption Is Raised to $50,000
After
the proposal of the amendment to increase the homestead exemption in 2004, the
State Division of Elections performed a study on the financial impact to local
governments should this amendment pass.79 Based on 2003 property tax rates and
assessed values, 80 the Division concluded that the amendment would remove over
$95 billion, or roughly ten percent, from the statewide property tax base.81
This translates to almost $765 million in county revenues, $830 million in
school district revenues, $239 million in municipal revenues, and $167 million
for other special districts,82 totaling over $2 billion in lost revenue
statewide. 83
In
addition, many homeowners would be exempt from paying any property taxes,
because their property is valued at $50,000 or
79.
Fla. Leg. Off. Of Econ. & Demographic Research, Citizen’s
Initiatives, http://edr.state.fl.us/conferences/constitutionalimpact/2005/citizensinitiative.htm
(last updated Feb. 21, 2006). As part of the amendment process, the Financial
Impact Estimating Conference prepares “Initiative Financial
Information Statements” on all constitutional amendments proposed by
citizen initiative, to demonstrate the financial or fiscal impact on the State
should the amendment pass, in accordance with Section 100.371 of the Florida
Statutes. Id. For a complete listing of financial impact statements for all of
the 2005 proposed amendments, see id. For a complete listing of financial
impacts for the 2004 proposed amendments, see id. At http://edr.state.fl.us/conferences/constitutionalimpact/2004+Ballot/citizensinitiative04ballot.htm
(last updated Sept. 29, 2005).
80.
Because the amendment was to appear on the November 2004 general election
ballot, the financial impact statement for the amendment is based on 2003
property values. Id. At http://edr.state.fl.us/conferences/constitutionalimpact/2004+Ballot/citizensinitiative04ballot.htm
(last updated Sept. 29, 2005). Because property values have continued to rise
since the Financial Impact Statement’s release, projected lost revenue
numbers would climb in subsequent studies. See infra nn.
123-125 and accompanying text (discussing rising property values in Florida).
81.
Fla. Dept. of St. Div. of Elections, Initiative Financial Information
Statement:
Additional
Homestead Tax Exemption #04-01 (adopted June 25, 2004) (available at http://edr.state.fl.us/conferences/constitutionalimpact/2004+Ballot/a6fis_complete.pdf)
[hereinafter initiative Statement].
82.
The statutory definition of a special district is “a local unit of
special government, except a district school board, created pursuant to general
or special law for the purposes of performing prescribed, specialized functions,
including municipal service functions, within limited boundaries.”
David M, Hudson, Special Taxing Districts, in Florida State and Local Taxes
vol. II, 425, 428, & 9.01 (Fla. B. 1984) (citing Fla. Stat. §
165.031(5) (1986)). In general, “special districts may perform a full
range of governmental and proprietary functions, all of which could be
performed by county or municipal government.” Id. At 427.
83.
Initiative Statement, supra n. 81.
[*527]
less. For example, based on 2003 property values in Polk County, owners of over
40,000 homes would have owed no property taxes under a $50,000 homestead
exemption, whereas only 7,352 homes were totally exempt under the $25,000
exemption.84 The Polk County Property Appraiser has estimated that more than
one third of Polk homeowners would be completely exempt from paying property
taxes if the exemption was raised to $50,000.85 Polk County projected a loss of
$18.1 million in tax revenues to the County Commission, and a loss of $19.4
million for the School Board.86 Lee County would have suffered $64 million in
losses under the new amendment, according to the Lee County Property
Appraiser.87 In Hillsborough County, the amendment would have resulted in
42,000 homeowners being exempt from paying any ad valorem taxes,88 compared to
6,200 exempt under the current system.89 In Pinellas County, Kenneth City alone
would have lost twenty-three percent of its base.9¡
Although
an increased exemption appears to be beneficial to most homeowners, saving them
a few hundred dollars in property taxes, local governments would be severely
impacted by such an amendment. For example, Palm Beach County would lose
approximately $35 million in revenue.91 In Hillsborough County, the effect
would be a revenue loss of $65 million, which is why county administrators are
opposed to the passage of such an amendment.92 Even fiscal conservatives, state
tax watchdogs, and prop-
84.
Double Whammy, Ledger (Lakeland, Fla.) A20 (June 13, 2004). Under the current
homestead exemption and Save Our Homes tax breaks alone, Polk County loses
$22.6 million in annual tax revenues. Bill Rufty,
Polk Owners Save $22 Mil. Every Year, Ledger (Lakeland, Fla.) Al (Sept. 18,
2005).
85.
Martin, supra n. 12.
86.
Id,
87.
The Truth about Homestead, http://www.truthabouthomestead.com/about.asp
(accessed Feb. 6, 2005).
88.
See supra n. 4 (defining “ad valorem taxation” and stating
that “ad valorem taxation” and “property
taxation” are used interchangeably throughout this Comment).
89.
Bigger Homestead Exemption Tricky Ploy to Shift Tax Load, Tampa Trib. At
Nation/World 10 (July 8, 2004).
90.
The Homestead Shuffle, St. Petersburg Times 14A (June 10, 2004).
91.
Dale M. King, Double Homestead Exemption — Or
Double Trouble? http://www
.truthabouthomestead.corn/news.asp (accessed July
11, 2005). This figure is based on 2004 projections.
92.
Stockfisch, supra n. 31. According to Hillsborough
County Administrator Pat Bean, “You either eliminate what [you are]
doing, or find the revenue to do it .... There are no free services. You pay
one way or another.” Id.
[*528]
-erty tax appraisers with anti-tax sentiments tend to
agree that governments and municipalities cannot run without the proper
revenue.93 Furthermore, even though some property owners may benefit from a few
hundred extra dollars in their pockets, a disproportionate amount of money will
be spent by local governments simply trying to implement the exemption in the
property appraisers’ offices.94 Updating property records,
recalculating tax bills, brainstorming about out how to make up for lost
revenue, cutting budgets, and fighting lawsuits are just a few of the many tasks
that will inevitably arise from the passage of the amendment and the subsequent
administrative nightmare of trying to implement the increased exemption.95
B.
Florida’s Population Influx and Infrastructure
Should
an increase to the homestead tax exemption take effect, revenues to local
governments will decrease significantly while the demand for new infrastructure
will continue to escalate. From 1990 to 2000, Florida experienced a population
growth of 23.5 percent.96 In comparison, the United States as a whole
experienced only a 13.1 percent increase in population during the same
period.97 Between 2000 and 2003, 89.2 percent of Florida’s rise in
population was due to migration,98 whereas only 10.8 per-
93.
Id. Anthony Cutaia, a real estate expert from Boca
Raton, commented, “[y]ou can’t run
government, you can’t run a school district, you can’t run a
municipality and starve them out of business.” Id. His sentiments are
shared by Dominic Calabro, the head of Florida TaxWatch, an independent tax watchdog, who sees the
movement as irresponsible and a “false accomplishment” that
will result in higher charges and service fees and ultimately be called the
“great tax shift of 2004 and beyond.” Id. Even Governor Bush,
a fiscal conservative, believes that “It] here’s no amount of
waste, fraud and abuse at the local level or the school district level that one
could envision would exist in that regard. There are going to have to be cuts
in services or higher taxes.” Id.
94.
Martin, supra n. 12. Polk County Property Appraiser Marsha Faux commented that
“a huge ad valorem tax dollar loss... [is] going to have to be made up
somewhere [T]he process of implementing [the amendment] would [be] time-consuming,
from a property appraiser’s standpoint.”
95.
Id.
96.
Fla. Leg. Off. of Econ. & Demographic Research, Demographic Info. for
Members
and
Staff 1 (Feb. 2004) (available at
http://www.state.fl.us/edr/population/newsletter.pdf) [hereinafter Demographic
Research]; see also U.S. Census Bureau, supra n. 27.
97.
U.S. Census Bureau, supra n. 27.
98.
Demographic Research, supra n. 96, at 1. Migration means that people are moving
to Florida from other places.
[*529]
-cent of the growth was attributed to natural increase.99 Florida is currently
ranked fourth in population behind California, Texas, and New York, but it is
expected to become the third largest state sometime between 2015 and 2020.100
However, the most surprising statistic may be that Florida has the ninth
highest population density per square mile in the country, behind only much
smaller states such as Rhode Island, Connecticut, and Delaware.101
With
a population influx that does not appear to be slowing down any time soon, the
need for increased infrastructure becomes apparent. Basic services such as
roads, public safety, water, sewer, and public schools, to name a few, will
have to be built to accommodate this rapid population growth. The cost of
funding these services is higher due to sprawl,102 or “low density
development outside of city centers,” which is the prevalent mode of
growth in the United States today. Currently, property tax revenues are the
primary way that local governments finance these necessary public services.103
Even
in the 1970s, studies found that the tax revenues generated by new developments
did not cover the cost of those developments’ demand for public
services.104 More recent studies conducted in California and Florida
demonstrate that the extra cost of providing infrastructure and municipal
services in connection with sprawl is approximately $20,000 per residential
unit.105 According to a 2003 survey of Florida’s civil engineers, the
most
99.
Id. Natural increase is the excess of births over deaths. Id.
100.
Id.
101.
U.S. Census Bureau, supra n. 27. The density statistic is surprising in light
of the fact that large areas of Florida are uninhabitable, such as the 1.5
million acres of wetlands in Everglades National Park. Natl. Park Serv.,
Everglades, Facts, http://www.nps.gov/ever/pphtml/facts.html
(accessed Mar. 30, 2006).
102.
Ken Snyder & Lori Bird, Paying the Costs of Sprawl: Using Fair-Share Costing
to Control Sprawl 3 (U.S. Dept. of Energy Dec. 1998). “Sprawl is
generally defined as very low-density development outside of city centers,
usually on previously undeveloped land.” Id. Infrastructure costs are
higher with sprawl because “the further away developments are from the
service centers that serve them,” the greater the expense to provide
those services. Id. at 11.
103.
Wershow & Schwartz, supra n. 4, at 67 (stating
that property taxation “is the major source of revenue for county,
municipal, and other local governments in Florida”); see also Denslow & weissert, supra n.
19, at 24 (stating that “[t]he two taxes that raise the most revenue
for state and local governments in Florida are the sales tax and the property
tax”).
104.
Snyder & Bird, supra n. 102, at 13.
105.
Id. at 10.
[*530]
pressing infrastructure concerns in Florida are roads, drinking water, mass
transit, and schools.106 Because over twenty percent of major roads in Florida
are in less-than-good condition and nineteen percent of Florida’s
bridges are either unusable or structurally deficient, Florida motorists spend
approximately $53 each per year, or $662 million total, in extra vehicle
repairs and operating costs.107 In addition, the infrastructure that supports
Florida’s drinking water will require $3.7 billion over the next
twenty years, while wastewater infrastructure will require $6.3 billion.108
Furthermore, a study of sewer hookups in Tallahassee found that the average price
for a sewer connection is about $6,000 per household.109 As Florida’s
population continues to increase, so will the need for additional revenue, not
only to build additional infrastructure, but also to refurbish and revitalize
existing structures.
C.
Current Limitations on Revenue Generation
In
light of Florida’s population increase and the resulting need for
additional revenue, local governments have a heightened awareness of the
constitutionally imposed limitations on how much revenue they can generate. One
such limitation in the Constitution is the millage rate cap.110 The Florida
Constitution mandates that no county may impose a millage rate greater than ten
106. Am. Socy. of Civ. Engrs., Florida, http://www.asce.org/reportcard/pdUfl.pdf
(accessed Jan. 6, 2006) [hereinafter Florida Survey],
107. Id. (citing July 2003 TRIP Fact sheets containing
transportation statistics compiled by TRIP, a nonprofit transportation research
group). According to a James Madison Institute study, transportation funding
has not kept pace with Florida’s growth, and the percentage of state
and local expenditures allocated to roads has decreased dramatically since the
1960s. Randall G. Holcombe, Paying for Growth, 32 J. James Madison Inst. 5-6
(Summer 2005) (available at http://www.jamesmadison.org/article.php/379.html).
The amount spent by the State and local governments on roads has steadily
declined from nineteen percent of their total budgets in 1960, to only 6.1
percent in 2000. Id. Therefore, “[ilf we
Floridians want to know why we find ourselves increasingly stuck in traffic,
the easy answer to the question is that we are spending a much smaller
proportion of our total government outlays on roads than we were a few decades
ago.” Id. The Texas Transportation Institute (TTI) has estimated the
costs of traffic congestion in seventy-five metro areas since 1982. Leroy
Collins Inst., supra n. 26, at 21. In 2000, TTI estimated that the total cost
in wasted time and fuel to Florida’s six largest metro areas was $4.25
billion, or $458 per person. Id.
108. Florida Survey, supra n. 106 (citing an
Environmental Protection Agency Drinking Water Infrastructure Needs Survey from
2001).
109. Snyder & Bird, supra n. 102, at 10-11.
110. Fla. Const. art. WI, § 9(b).
[*531]
mills, and only a constitutional amendment can change this provision.111 As of
2004, fourteen Florida counties had reached the ten mill county cap, and eight
other counties had millage rates within one mill of the cap.112 Ten
municipalities imposed a millage rate at or above nine mills.113 In addition,
over twenty percent of homestead properties in twelve different counties were
completely exempt from paying property taxes in 2004.114
Using
2003 tax rates and assessed values, if the homestead tax exemption increased to
$50,000, twenty-eight of Florida’s sixty-seven counties could not
recoup all of their lost revenue through raising millage rates alone, because
of the constitutionally imposed limit of ten mills.115 Most of the hardest hit
counties are poor, rural counties with small populations.116 A 1980 study
indicated that the increase in the homestead exemption from $5,000 to $25,000
at that time “undermined the viability of the property tax as the
major revenue source for local government, especially in areas experiencing
slow economic growth117 These same counties would face an even more difficult
situation today, if the homestead exemption was to be increased to $50,000.
111.
Id. For the legal definition of “mill,” see supra n. 4.
112.
2004 Prop. Valuations, supra n. 11, at 171-172. The fourteen counties at their
ten mill limit in 2004 were Calhoun, Dixie, Gadsden, Gilchrist, Glades,
Hamilton, Holmes, Jefferson, Lafayette, Liberty, Madison, Suwanee,
Union, and Washington. Id. The eight counties within one mill of the ten mill
limit in 2004 were Bradford, Duval, Hendry, Highlands, Levy, Putnam, Sumter,
and wakulla. Id.
113.
Id. at 93-167. The ten municipalities were Indian Creek, Islandia,
Opa-Locka, Zolfo Springs, Greenville, Belle Glade,
Riviera Beach, Crescent City, South Bay, and Lake Wales. Id.
114.
Id. at 246-247. The twelve counties with over twenty percent tax exempt parcels
in 2004 were Calhoun, Dixie, Hamilton, Holmes, Jackson, Lafayette, Liberty,
Madison, Putnam, Taylor, Union, and Washington. Id.
115.
Initiative Statement, supra n. 81, at 4.
116.
Maurice Tamman, Counties with Poor, Stable
Populations Hun by Revenue Law,
Sarasota
Herald-Trib. A12 (Sept. 21, 2005); see generally
supra nn. 112-114 (summarizing the counties that
either operated at their ten mill cap or had at least twenty percent of
residential properties completely exempt from paying ad valorem taxes in 2004).
117.
Van Assenderp & Solis, supra n. 51, at 837.
According to one report, “because of Save Our Homes and other
exemptions, 18 of Florida’s 67 counties could levy taxes on 50 percent
or less of their properties’ value” in 2004. Tamman, supra n. 116. These counties are typically inland
counties and “[struggle] more for tax revenue than coastal counties
because they can’t attract the wealth that migrates to the
waterfront.” Id. The result is that some Florida counties are flush
with cash to spend, while others, like Liberty County, have to rely on grants
from the State just to find routine government services. Id.
[*532]
Another limitation on current revenue generation is the total exemption from ad
valorem taxation that certain types of property currently enjoy, such as
hospitals, charities, and religious organizations.118 These entities often pay
little, if any, property taxes.119
The
most stifling limitation on revenue generation is the Save Our Homes Cap, which
removes billions of dollars from the taxable base each year.120 For homestead
property, Save Our Homes limits the increase in assessed value to three percent
above the value for the preceding year, or the increase in the consumer price
index for the preceding year, whichever is less.121 Thus, a homeowner with
homestead status is entitled to a $25,000 reduction in the assessed value of
the property, plus the three percent cap on increases to the assessed value.122
However, upon sale of the property, property appraisers reassess the property at
fair market value, and the new owners “start over” with Save
Our Homes.123 This phenomenon can result in tax inequities between similarly
situated properties.
The
disparity in tax treatment comes when the “old” homeowner
sells to the “new” homeowner and the property is reassessed
at fair market value. The “new” homeowner’s property
taxes may double or triple that first year, because the three percent Save Our
Homes cap has prevented the previous assessments from accurately reflecting the
increase in the property’s true value.124 This scenario is especially
likely given that from
118.
Fla. Const. art. VII, § 3.
119.
These organizations are, however, subject to special assessments and impact
fees, which will be discussed in more detail in Part W(B)(i).
See also Dubov, supra n. 11, at 1488 (discussing
local governments’ use of special assessments to levy “hidden
taxes” against tax-exempt properties).
120.
In 2004, “Save Our Homes saved Floridians $2.9 billion in countywide
property taxes,” while the “homestead and all other
exemptions saved them another $2.2 billion.” Maurice Tamman, Save Our Homes Riddles Property Taxes with
Inequities, Sarasota Herald-Trib. Al (Sept. 18,
2005); see also Dubov, supra n. 11, at 1477-1478
(noting that in 1999 alone, Save Our Homes and the homestead exemption together
saved over $112 billion in property value from taxation).
121.
Franklin & Baugher, supra n. 24, at 35.
122.
Id. at 35-36.
123.
Id. at 38-39.
124.
For example, two condominiums, each with the same number of rooms, the same
view of the Gulf of Mexico, worth the same amount of money, and separated by
one floor, could have tax bills of $5,700 and $2,300, respectively, because of
how long the property owner has owned the home. E.g. Tamman,
supra n. 120 (describing the tax bills of two
[*533]
2003 to 2004, property values in Florida increased an average of 14.13
percent.125 As property values increase at astronomical rates in some counties
and at a steady pace in others,126 Save Our Homes limits increases in assessed
value to three percent of the previous year’s value, while the
homestead exemption takes another $25,000 off the assessed value. These
limitations translate into billions of dollars lost from the State’s
tax base.
IV
THE UNINTENDED CONSEQUENCES OF INCREASING THE HOMESTEAD EXEMPTION
In
addition to substantially reducing local government revenues, increasing the
homestead exemption also raises many possible legal problems. First, an
increase in the exemption could pave the way for new constitutional challenges
to the exemption under the Equal Protection Clause. Second, there is the
likelihood that local governments would look to alternative sources of funding
to recoup lost revenue, some of which may or may not be constitutional. In
addition, there are underlying public policy concerns involving the traditional
purpose of the homestead and Florida’s reliance on tourism for its
economic base.127
similarly
situated condominium owners in Siesta Key). In addition, it is quite possible
that a homeowner’s market value may increase upwards of ten to twelve
percent per year, because property values statewide have steadily increased an
average of 10.63 to 14.13 percent over the last five years. Fla. Dept, of
Revenue, Florida Property Valuations and Tax Data Book-Florida Property Just
Value Growth by Percentage, http://www.state.fl.us/dor/property/justvalperc.html
(accessed Feb. 8, 2006) [hereinafter Growth by Percentage]. Even though each
respective homeowner’s assessed value is currently limited to a three
percent increase per year, if the property changes ownership, the new owner
will be taxed at the fair market value of the property.
125.
Growth by Percentage, supra n. 124.
126.
2004 Prop. Valuations, supra n. 11, at 1-2. From 2003 to 2004, twenty-six
Florida counties experienced an increase in just value of real property of more
than fifteen percent. Id. For example, property values increased 16.19 percent
in Alachua County, 34.23 percent in St. Lucie County, and 46.68 percent in
Okeechobee County. Id. The average increase in just property value for all
Florida counties from 2003 to 2004 was 15.29 percent. Id. at 2.
127.
Blanton, supra n. 3, at 445-446 (discussing Florida’s almost exclusive
reliance on the sales tax for its revenue); see also Michael Braga, Snowbirds
Feel Tax Heat, Sarasota Herald-Trib. Al (Sept. 23,
2005) (stating that nearly one million snowbirds travel to Florida each year,
according to a University of Florida study, and that these visitors may easily
spend in excess of $4 billion a year in Florida’s economy).
[*534]
A. Equal Protection Debate
An
acquisition-value taxation system such as Florida’s significantly
shifts the tax burden to recent buyers and renters of residential property, as
well as to business owners and owners of commercial property, which raises an equal
protection argument that has been heard by the United States Supreme Court.128
In the late 1970s, California passed Proposition 13, which is a system similar
to Florida’s Save Our Homes Cap.129 It is somewhat ironic that
Florida’s decision in 1980 to increase the homestead exemption to
$25,000 was spurred by fear that voters would pass something similar to
Proposition 13.130 For twenty-five years, California has been an example of
what an acquisition-value real property taxation system such as Save Our Homes
can do to local governments. 131 In many respects, Proposition 13 has changed
the way that local governments operate in California —
and not always for the better.132
128.
The United States Supreme Court considered an equal protection challenge to an
acquisition-value taxation system in Nordlinger, 505
U.S. 1. For an explanation of “acquisition-value taxation,”
see supra n. 24.
129.
LaFrance, supra n. 24, at 818-819, n. 18. California’s Preposition 13
is similar to Save Our Homes in that transfer triggers a reassessment at fair
market value; however, Proposition 13 limits the annual increase to two percent
and has carved out “exceptions” for certain classes of
transfers. Id. Proposition 13 also applies to secondary, rental, or commercial
property, whereas Save Our Homes only applies to homestead property. Id. Like
Floridians, Californians were concerned about rapidly increasing property
values and rates of housing inflation that led to large increases in property
tax bills. Jonathan Schwartz, Student Author, Prisoners of Proposition 13:
Sales Taxes, Property Taxes, and the Fiscalization of
Municipal Land Use Decisions, 71 5. Cal. L. Rev. 183, 186 (1997).
“[H]ad Proposition 13 failed,.. . homeowners’ property tax
bill[s] would have almost doubled between 1974 and 1978.” Id. (quoting
Jack Citrin, California and the American Tax Revolt:
Proposition 13 Five Years Later 1, 18 (Terry Schwadron
ed., U. Cal. Press 1984)).
130.
Osterndorf, 426 So. 2d at 541.
131.
Schwartz, supra n. 129, at 183-184. California voters passed Proposition 13 in
1978, and it “has had severe and dramatic consequences for land
use.” Id. at 183, 185. Although the intent of voters was “to
limit the scope and power of government, the initiative has actually empowered
the state to act in areas traditionally left to local politicians.”
Id. at 185.
132.
Id. at 183 (stating that “Proposition 13 has had implications for
California that transcend the assessment of property taxes,” such as
an increased reliance on the sales tax and the “fiscalization of
municipal land use”); see also Andrew Reding,
The City That Staged a Rebellion and Embraced Property Taxes, L.A. Times M2
(Apr. 5, 1998) (stating that “[t]he long-term effect [of Proposition
13 and its progeny] has been to encourage the proliferation of other forms of
taxation-user fees, franchise fees, utility taxes, special assessments-that are
more regressive than property taxes, imposing a larger burden on all but the
wealthiest taxpayers”).
[*535]
Notwithstanding the negative effects that Proposition 13 has had on local
governments, the United States Supreme Court upheld Proposition 13 after a
California homeowner challenged the statute on equal protection grounds.133 In
1992, the Court decided Nordlinger v. Hahn,134
holding that Proposition 13 was not unconstitutional, and deferring to the
State’s taxation authority.135 After Nordlinger,
future constitutional challenges to the Save Our Homes Cap may not succeed.136
However, Nordlinger left the door open to challenges
to acquisition-value taxation systems because the Court in Nordlinger
did not overturn, but merely distinguished, Allegheny Pittsburgh Coal Co. v.
County Commissioner. 137 In Allegheny, a county tax assessor in Webster County,
West Virginia, assessed coal mining property based on acquisition cost, but
made only minor adjustments to the value of other property that had not
recently sold, which left comparable properties receiving substantially
different tax treatment.138 The Court held that “the relative
undervaluation of comparable property in Webster County over time... denies
petitioners the equal protection of the law,” reasoning that equal
protection requires “the seasonable attainment of a rough equality in
tax treatment of similarly
133.
Nordlinger, 505 U.S. at 4, 17.
134.
505 U.S. 1.
135.
Id. at 17-18; Morrow, supra n. 26, at 587.
136.
In 2003, the Georgia Supreme Court overruled a trial court’s finding
that a county’s acquisition-value taxation structure was a violation
of the Equal Protection Clause. Columbus-Muscogee County Consol. Govt. v. CM
Tax Equalization, Inc., 579 S.E.2d 200, 204 (Ga. 2003). Although the Court
addressed the dramatic disparities in taxation that can occur in
acquisition-value taxation, the Court followed the Nordlinger
ruling in holding that the County’s tax system was valid. Id. at
203-204. In the Georgia case, the homestead value was essentially
“frozen” for the purpose of county taxation until the
property experienced a change of ownership, but for state tax purposes the
property was taxed at fair market value. Id. at 201. The “homestead
freeze” was approved by a majority of the county’s voters.
Id. The Georgia Supreme Court ruled that despite a conflict with the state
constitution’s uniformity clause, which stated that “all
taxation shall be uniform upon the same class of subjects within the
territorial limits of the authority levying the tax,” the
county’s “homestead freeze” was valid because it was
intended by the Legislature to amend the uniformity clause. Id. at 202, n. 1.
137.
488 U.S. 336 (1989); Morrow, supra n. 26, at 588 (explaining that by
“failing to establish any bright-line test, the Court left the door
open for continued attacks against acquisition-value taxation,” and
thus, “state courts have continued to hear challenges against
acquisition-value property taxation and the academic debate over the
repercussions of this method of taxation [has] endured”).
138.
488 U.S. at 338.
[*536]
situated property owners.”139 When the Court was later confronted with
deciding the constitutionality of Proposition 13 in Nordlinger,
the Court distinguished Nordlinger on the grounds
that Proposition 13 was enacted for a valid state purpose.140 But because
Allegheny was not overturned by Nordlinger, the door
was left open for disgruntled property owners to challenge systems of
acquisition-value taxation.141 Should a constitutional amendment increase the
homestead tax exemption to $50,000, Florida courts may have to revisit whether
Florida’s current system creates two classes of homeowners who are
treated unequally and unfairly by the state’s system of property
taxation.
The
homestead exemption, in conjunction with Save Our Homes, creates two classes of
homeowners in Florida because there is no limit on the assessed value of
non-homestead property. Business owners, rental property owners, and part-time
residents pay more in taxes than those who own homestead real property because
non-homestead property is assessed at fair market value.142 Should a homestead
exemption increase take effect, non-homestead property owners may be required
to pay even more in taxes, through millage rate increases or higher
occupational li-
139,
Id. at 343, 346. At the time of the Allegheny decision, the Court was aware of
the Proposition 13 system in California, and even referred to Proposition 13 in
a footnote, but “chose not to address the constitutionality of
Proposition 13.” Morrow, supra n. 26, at 603.
140.
Allegheny, 488 U.S. at 344 n. 4; Morrow, supra n. 26, at 603-604. According to
the Court, the difference between Proposition 13 and west Virginia’s
system was that Proposition 13 was adopted “precisely to achieve the
benefits of acquisition-value taxation,” whereas west
Virginia’s “unequal assessment practice ... had no such
purpose.” Id. Most important, “the west Virginia Constitution
guaranteed that ‘taxation shall be equal and uniform throughout the
state, and all property, both real and personal, shall be taxed in proportion
to its value.’” Morrow, supra n. 26, at 605 (quoting W. Va.
Const. art. X, § 1). Therefore, the acquisition-value system
“‘contravene[d] the constitutional right of one [to be] taxed
upon the full value of his property.’” Id. at 603 (quoting
Allegheny, 488 U.S. at 345).
141.
Morrow, supra n. 26, at 604-605 (noting that “the Court chose to
preserve, but severely narrow, the notion that ‘dramatic disparities
in taxation of properties of comparable value’ can violate equal
protection” (quoting Allegheny, 488 U.S. at 345)).
142.
LaFrance, supra n. 24, at 819 n. 18 (explaining that Florida’s Save
Our Homes and homestead provisions do not apply to secondary homes, rental
properties, or commercial properties). An increase in property taxes can have a
devastating effect on local businesses and the economy. If business owners
cannot generate enough revenue to cover increases in property taxes, they could
be forced to close or sell to developers. See Michael Braga & Maurice Tamman, Rising Property Taxes Sink Coastal Business,
Sarasota Herald-Trib. Al (Sept. 20, 2005) (reporting
the devastating impact of escalating property taxes on small business owners,
and implicating the lack of homestead or Save Our Homes protection as a key
factor in the problem).
[*537]
-cense fees, in order to make up for lost revenue to the local taxing
authority.143
An
additional concern is the effect that changes in the property tax system will
have on tourism revenue. Florida depends on the sales tax for a large portion
of its tax base, of which travel and tourism make up a significant amount.144
Many of these tourists rent real property for several months out of the year,
and many of these tourists are elderly.145 A 2004 survey of Florida’s
temporary residents revealed that almost sixty-four percent of these part-time
residents were age fifty-five or older, compared to only thirty-two percent of
permanent residents.146 As a result of Save Our Homes and the increased
homestead exemption, non-homestead property (including seasonal homes and
rental property) will pick up more of the tax burden because these homes will
be reassessed and taxed each year at full fair market value.147 In turn,
property owners will pass these additional taxes along to renters.148 For many
elderly persons on fixed incomes, who either are seasonal renters or cannot
afford to purchase property in Florida, increased rent may mean that they spend
vacations else-
143.
Advisory Op. Additional Homestead, 880 So. 2d at 652-653 (explaining that the
language of the proposed ballot to increase the homestead tax exemption was
misleading because local governments were still free to raise millage rates);
see also Truth about Homestead, supra n. 87 (asserting that “Loiwners
of non-homesteaded property such as second homes, rental properties and
commercial buildings” would suffer from increased property tax rates
in response to the amendment, which would in turn discourage investors from
building or buying those types of properties); LaFrance, supra n. 24, at
1071-1072 (arguing that Florida’s real property taxation laws allow
non-homestead property owners to be the most tax-burdened group of people in
the State).
144.
Supra a. 127 (discussing Florida’s reliance on the sales tax and
tourists’ spending habits).
145.
Stanley K. Smith & Mark House, Snowbirds and Other Temporary Residents:
Florida 2004 at 4-5, 9, http://www.bebr.ufl.edu/Articles/FloridaPop2005.pdf
(Oct. 2004) (citing a survey reflecting that temporary residents stayed in
Florida an average of five months, 46.2 percent of those temporary residents
were over age sixty-five, and 32.6 percent of them did not own a residence in
Florida).
146.
Id. at 5-6.
147.
See Braga, supra n. 127 (stating that, for example, “[in Manatee and
Sarasota counties, temporary residents own 46 percent of all residential
property, but pay 58 percent of the taxes”).
148.
See Dale White & Michael Braga, Tenants Suffer As Higher Taxes Force
Landlords
to
Raise Rents, Sarasota Herald-Trib. A1 (Sept. 23,
2005) (explaining that landlords must pass along costs to tenants to stay in
business, yet low-income tenants cannot afford to absorb the additional rent
increases).
[*538]
-where, thus reducing the State’s tax revenue from tourism and travel.
149
Because
of Save Our Homes, two homes of equal fair market value can have significant
differences in property taxes simply because one of the homeowners has resided
on the property for many years.150 Young families, first-time homebuyers, or
new residents to the State are severely impacted by this disparity in property
taxes, because they are purchasing homes that will be reassessed at fair market
value once ownership has changed hands.151 In Osterndorf,
the Florida Supreme Court held that imposing different taxes solely on the
basis of length of residence in the state violated Florida’s Equal
Protection Clause.152 In essence, the Court decided that by not allowing
residents of less than five years to receive the full homestead exemption, the
Legislature had created two classes of homeowners.153
Similarly,
the argument can be made that the Save Our Homes Cap and the homestead
exemption create two classes of homeowners —
those that have resided in their home for a period of years, and those that are
seeking to purchase a first home or a new home. According to the Court in Osterndorf, to satisfy equal protection, “there
must be at least a rational basis for disparities to exist.154 Proponents of
Save Our Homes and the homestead exemption will argue that the State has a
legitimate interest in protecting persons-especially the elderly-from being
forced out of their homes because they can no longer afford their tax bills.155
This is a legitimate argument; however, the inverse of that argu-
149.
See id. (pointing out that Florida’s tax structure “has
created a system that punishes renters-often those least able to pay-with a
higher tax burden”); see also Smith & House, supra n. 145, at 17
(noting that approximately 920,000 temporary residents per year have a
“substantial impact on many aspects of life in Florida”).
150.
LaFrance, supra n. 24, at 817.
151.
See id. at 842-843 (noting that “acquisition-value taxation provides a
windfall to wealthy taxpayers while shifting their share of the cost of state
services to recent buyers, whose incomes in many cases may be lower”).
152.
426 So. 2d at 544-546.
153.
Id. at 545.
154.
Id.
155.
See Smith, 729 So. 2d at 372-373 (setting forth the policy reasons for the Save
Our Homes amendment and stating that it “was designed to ensure that
citizens on fixed incomes will not lose their homes ... due to the rising value
of Florida property”); see also Morrow, supra n. 26, at 596-597
(noting that individuals with low or fixed incomes are disadvantaged during
times of rapidly increasing property values if their homes are reassessed at
fair market value).
[*539]
-ment is also valid. The State has a substantial interest
in providing affordable housing to homeowners and non-homeowners alike and in
protecting people from being prevented from owning a home altogether.
First-time homebuyers, young families attempting to purchase a home, or those
families simply looking to sell their current home in favor of another home,
can face property tax bills that significantly affect quality of life, causing
some families to go into debt or to fall behind on monthly bills.156 Thus, the
effect these amendments can have on new homebuyers contradicts the purposes of
homestead and Save Our Homes, which are to protect the family home and prevent
the family unit from losing its home because of financial difficulties.157
Some
may argue that nothing is wrong with forcing new residents to bear the majority
of the tax burden. It is human nature not to be concerned with the quality of
life of outsiders who are not part of the group.158 One justification for the
disparities, which is favored by locals and not so much by courts, is that newcomers
to the system have not contributed to the system and thus should not benefit
from it, whereas “established residents should be able to reap that
which they have created through their [past] contributions.”
Addressing this issue, the Court in Osterndorf
clearly stated that it is unconstitutional to reward homeowners for past
contributions to the State.160 Yet, Save Our Homes rewards homeowners based on
the length of time they have resided in a home, and thus on the taxes and
monies they have previously
156.
See Tamman, supra n. 120 (discussing the extreme tax
inequities that result from the current system, and stating that some of the
hardest hit are “parents with growing families who want more space, or
empty nesters who want a smaller home”); Michael Braga, Homeowners
Feel Trapped by Taxes, Sarasota Herald-Trib. Al
(Sept. 22, 2005) (pointing out that many people cannot afford the high tax
bills associated with buying a new home under the acquisition-value tax system
in Florida, and are therefore forced to stay put, move out of the state, or
downsize).
157.
Supra pt. 11(A) (providing the origins and purposes of the homestead exemption
and Save Our Homes).
158.
Robert C. Farrell, Classifications That Disadvantage Newcomers and the Problem
of Equality, 28 U. Rich. L. Rev. 547, 567 (1994).
159.
Id. at 568.
160.
426 So. 2d at 545. In Zobel v. Williams, 457 U.S. 55
(1983), Justice O’Connor wrote that rewarding past contributions is
not necessarily impermissible, but a state cannot “achieve this
objective by disadvantaging those who [have] more recently exercised their
right to travel ... [or by] treat[ing] new residents
less favorably than longer-term residents who are the only ones who have
‘past contributions’ within the state to reward.”
Farrell, supra n. 158, at 572 (discussing the Supreme Court’s decision
in Zobel).
[*540]
paid into local government cofFers.161 To allow newcomers to bear most of the
property tax burden may be constitutional at the moment, but it may be bad
public policy for a state like Florida that depends on newcomers, young and
old, to travel to Florida, establish residences, and spend money that accounts
for a substantial portion of the State’s revenue-the sales tax.162
Finally,
would the additional homestead tax exemption really provide “tax
relief” to all Florida homeowners, even under an acquisition-value
taxation system? The Florida Supreme Court did not believe so, reasoning that
if the homestead exemption was raised to $50,000, some counties would then
raise millage rates to try and recoup the lost revenue.163 The Florida Supreme
Court’s discussion of this effect in its 2004 advisory opinion led the
Court to declare that the text of the amendment was misleading to voters
because not all homeowners would experience “tax relief.”164
In addition, an increased homestead exemption in conjunction with the Save Our
Homes Cap could create such a disparity in tax treatment that it would violate
equal protection principles, notwithstanding Nordlinger.
The Florida Supreme Court has not had the opportunity to address the Save Our
Homes amendment as violative of the Equal Protection
Clause of the Florida Constitution, 165 and in Florida League of Cities v.
Smith,166 Justice Over-
161.
However, at the same time that Save Our Homes rewards homeowners it also
penalizes them, because when homestead property owners move, any new property
they buy will be taxed at fair market value; thus many property owners choose
not to move because they fear an unaffordable property tax bill. Braga, supra
n. 156. In addition, a law that prefers “long-term residents over
newcomers. . . create [s] undeserved rewards simply for staying in one
place.” Farrell, supra n. 158, at 570.
162.
Supra n. 127 (discussing the importance of the sales tax and tourism to
Florida’s economy).
163.
Advisory Op. Additional Homestead, 880 So. 2d at 652. If millage rates were
raised, those who own high value property would actually pay more in taxes and
not get the “tax relief” promised by this proposed amendment,
thus creating even more disparities in tax treatment. Id. at 652-653. But see
supra pt. 111(C) (noting that only thirty-nine of Florida’s
sixty-seven counties would be able to recoup their lost revenues through
raising millage rates).
164.
Advisory Op. Additional Homestead, 880 So. 2d at 652-654; see also Martin Dyckman, Floridians Can’t Afford to Fall for This
Homestead Initiative Seam, St. Petersburg Times 3P (May 30, 2004) (stating that
“the sponsors’ claim that ‘every Florida homeowner
will save $500 per year in Florida property taxes’ is untrue. It would
be true only if every home were already assessed at $50,000 or more, if every
home were taxed at the statewide average rate of [twenty] mills, and if it
could be guaranteed that every taxing authority would swallow the loss without
raising its tax rates.”).
165.
Fla. Const. art. I, § 2.
[*541]
-ton stated, “While the adoption of amendment 10 might be
constitutional under the federal [C]onstitution ...
the issue of whether amendment 10 is constitutional under Florida’s
equal protection clause has not been resolved .... [T]he question arises as to
whether Florida’s equal protection clause is also being modified and
amended by implication without appropriate notification to the
voters.”167 Under the Court’s reasoning in Osterndorf, an increased homestead exemption may not
provide tax relief, but would combine with the Save Our Homes amendment to
treat similarly situated homeowners so differently in terms of tax treatment
that it might violate the Florida Constitution.
B.
Alternative Sources of Funding
Let
us assume that an increase in the homestead tax exemption passes constitutional
muster and is approved by voters in a future general election. The question
then becomes, What will local governments do in order to make up lost revenue?
In theory, one could argue that local governments should not look for
alternative sources of funding at all, but merely become more efficient at
allocating the resources available to them.168 However, this theory is flawed
because “[t]axes are only one type of many charges imposed by
government”169 and the reduction in revenue resulting from the current
exemptions has not slowed government spending.170 Although in Florida there are
constitutional restrictions on the imposition of taxes, these constitutional
restrictions do not always apply to other fees or charges that local governments
may impose.171 Non-tax types of charges that governments
166.
607 So. 2d 397 (Fla. 1992).
167.
Id. at 404 (Overton, J., dissenting).
168.
See Morrow, supra n. 26, at 617 (noting that the citizens of California adopted
an acquisition-value taxation system not because they wanted governments to
find alternative sources of funding, but because they wanted to lower their
property tax liability and force local governments to be more efficient); see
also Maurice Tamman & Michael Braga, Tax Revolt
Doesn’t Hold Down Revenue, Sarasota Herald Trib. Al (Sept. 21, 2005)
(stating that making government cut down on spending was precisely the reason
for the original support behind Save Our Homes).
169.
Cooper & Marks, supra n. 5, at 435.
170.
Tamman & Braga, supra n. 168 (noting that the
Saves Our Homes amendment “didn’t constrain government
spending”).
171.
Cooper & Marks, supra n. 5, at 435.
[*542]
impose include everything from impact fees172 to special assessments.173
Sometimes, to avoid going through the constitutional and statutory quagmire
associated with imposing taxes, governments will try to impose charges as fees
rather than taxes.174 Thus, Florida courts have heard and continue to hear
cases on whether local governments are actually imposing unconstitutional taxes
under the guise of “fees.”175 In recent years, Florida courts
have been less stringent in applying the rules that have traditionally
distinguished taxes from special assessments because of the financial difficulties
that local governments face.176
172.
“Impact fees are one-time charges on new construction that pay a
proportional share of the cost of the capital outlay needed to serve the new
development.” Denslow & Weissert, supra n. 19, at 43. Because impact fees
“are a relatively easy way to raise revenues” they are
favored in rapidly growing areas as a way to meet infrastructure needs. Id.
at
43-44.
173.
Cooper & Marks, supra n. 5, at 435. Special assessments are levied to
“provide a special benefit to the assessed property.” Dubov, supra a. 11, at 1484. Although they too are
involuntary payments, special assessments differ from taxes “because
taxes are levied for the general benefit of the community.” id. An
example of a special assessment would be a charge to a specific property owner
whose property benefited from a street improvement, sewer system improvement,
or drainage improvement. Id. at 1485.
174.
Cooper & Marks, supra n. 5, at 435; see also Dubov,
supra n. 11, at 1484 (stating that “[l]ocal
governments have found new and creative ways to raise revenue. .. [by] collect
[ing] regulatory fees, user and impact fees, and
special assessments”).
175.
In Contractors and Builders Assn. v. City of Dunedin, 329 So. 2d 314 (Fla.
1976), the Florida Supreme Court held that revenue that the city collected for
“capital improvements to the [water and sewage] system as a
whole” constituted an ultra vires attempt by
the City to impose taxes. 329 So. 2d 314, 316-317 (Fla. 1976). In Lake County
v. Water Oak Management Corp., property owners filed suit to invalidate the
County’s special assessments for fire protection and solid waste
disposal services. 695 So. 2d 667, 668 (Fla. 1997). The Florida Supreme Court
held that Lake County’s services, which were funded by the special
assessment, provided “a special benefit to the assessed
properties,” and therefore it upheld the assessment as valid. Id. at
670. In 1999, the Fourth District Court of Appeal upheld the validity of a St.
Lucie County ordinance that imposed special assessments for waste collection on
only a designated portion of the unincorporated area of the County. Sockol v. Kimmins Recycling
Corp., 729 So. 2d 998, 1001 (Fla. 4th Dist. App. 1999). See Cooper & Marks,
supra a. 5, at 435 (stating that courts are often needed “to delineate
the boundaries between taxes and other governmental fees”).
176.
Dubov, supra n. 11, at 1494 (noting the
“erosion of the special benefits test” that occurred when
comparing its application by the Florida Supreme Court in City of Ft.
Lauderdale
v. Carter, 273 So. 2d 260 (Fla. 1954) and Harris v. Wilson, 693 So. 2d 945
(Fla. 1997)).
[*543]
1. Special Assessments and Impact Fees
Florida
counties impose special assessments to pay for services, facilities, works, and
improvements.177 Special assessments are the subject of much debate because
they are not assessed based on property value, and the purpose of special
assessments is to provide a special benefit only to the assessed property, not
to the general community.178 A concern exists that local governments are
imposing unconstitutional taxes in the form of special assessments by simply
using the term “special assessment.”179
In
general, there is a two-part test used to evaluate the validity of special
assessments.180 “First, the property assessed must derive a special
benefit from the service provided.”181 Second, “the
assessment must be fairly and reasonably apportioned among the properties that
receive the special benefit.”182 A problem with special assessments
arises when all properties in a community benefit from a project or service
that is supposed to be beneficial only to the assessed property.183 For example,
because assessments for sewer systems, drainage, and pavement of roads have
traditionally been upheld as valid, local governments have attempted to use
special assessments to finance system rehabilitation projects that will
ultimately benefit the community at large and not just the assessed property
owners.184 In Hanna v. City of Palm Bay,185 a road rehabilitation project
funded through special assessments came on the heels of the voters failing to
approve a millage rate
177. Van Assenderp
& Solis, supra n. 51, at 835. In the late 1980s, the use of special
assessments was “increasing in Florida counties, unlike in the rest of
the country.” Id.
178. Dubov,
supra n. 11, at 1484; van Assenderp & Solis,
supra n. 51, at 831. One problem with special assessments and impact fees is
that, because they are not based on property value, they can have a
disproportionate impact on low-income property owners. For example,
“the charge is the same for a $125,000 or $500,000 home.”
Leroy Collins Inst., supra n. 26, at 21.
179. Dubov,
supra n. 11, at 1490 (discussing the author’s opinion that local
governments are levying impermissible taxes by labeling them as
“special assessments”).
180. City of Boca Raton v.
State, 595 So. 2d 25, 29 (Fla. 1992); see also van Assenderp
& Solis, supra n. 51, at 853-864 (discussing the two-part test for what
constitutes a special assessment versus a tax).
181. City of Boca Raton, 595
So. 2d at 29,
182. Id.
183. Dubov,
supra ii. 11, at 1485-1486.
184. Id. at 1485-1487
(discussing the special benefit requirements).
185. 579 So. 2d 320 (Fla. 5th
Dist. App. 1991).
[*544]
increase to fund the project.186 Although the Fifth District Court of Appeal
ultimately concluded that the special assessment was an unconstitutional tax,
the situation in Hanna is merely one example of bow many local governments will
try to impose alternative fees on homeowners when needed revenue is not
available to them through permissible taxation.187
In addition, local governments use special assessments
to “sidestep property tax exemptions and to levy assessments against
properties that are partially or wholly exempt from taxation,”
including church, hospital, and non-profit organization property.188 If the
homestead tax exemption increases and local governments have less revenue to
work with, it is possible that local governments will routinely fund
community-wide services with special assessments until they are challenged in
the courts.189 Due to the blurred line between what constitutes a tax and a
special assessment, some have suggested that Florida’s system needs to
be revamped to create a uniform understanding of special assessments.190
Impact
fees are another alternative source of funding for local governments.
Generally, impact fees are imposed on new development “to recoup or
offset a proportionate share of public capital costs required to accommodate
such development with necessary public facilities. “191 Local
governments are continually turning to impact fees to finance necessary
infrastructure. 192 The govern-
186.
Id. at 323.
187.
Id.; Dubov, supra n. 11, at 1484-1488 (discussing
other attempts by local governments to use special assessments to fund
community-wide projects).
188.
Id. at 1488; see supra nn. 118-119 and accompanying
text (discussing the constitutional exemptions for certain types of property).
189.
See id. at 1484-1490 (suggesting that special assessments are routinely used as
an alternative funding source and are therefore frequently challenged as
improper taxation).
190.
E.g. van Assenderp & Solis, supra n. 51, at
854-856 (recommending specific steps that governing bodies should take in
ascertaining what constitutes a “special benefit”).
191.
Snyder & Bird, supra n. 102, at 13 (citation omitted).
192.
See Michael W. Woodward, Free Schools and Cheap Mobile Homes: School Impact
Fees
Come to Rural Florida, 70 Fla. B.,J. 70, 70 (May 1996) (stating that local
governments “are turning to impact fees as a means of financing the
building of roads, sewage treatment plants, and other capital facilities
required as a result of the increase in population”).
California’s local governments have also had to find alternative
sources of revenue to fund infrastructure. After Proposition 13, local
governments established special assessment districts, raised existing fees, and
enacted new local taxes, such as “new development fees, real estate
transfer fees, business license fees, utility user fees, sewer charges, and
park and recreation fees.” Tern A. Sexton et al., Proposition 13:
Unintended Effects and Feasible
[*545]
-ment’s power to impose impact fees is derived from two sources:
police power and proprietary power.193 “The validity of impact fees
turns on the closeness of the relationship between the fee paid and the public
service provided (or, alternatively, the public harm prevented).”194
In some poorer counties, schools have been the latest beneficiaries of user
impact fees, but questions arise regarding whether schools can be funded
through impact fees because under the Florida Constitution, children are
entitled to a “free” public education.195 An additional
conflict lies in the fact that without specific legislative authorization,
school districts have no power to impose impact fees.196 Yet, because of
financial constraints, some school districts are willing to take a chance until
they are challenged in court.197 If local governments are constricted because
of the increased homestead tax exemption, they too may opt to impose impact
fees, which may be unconstitutional, thus wasting additional government
resources on litigation.
One
argument against impact fees is that they tend to be regressive.198 Impact fees
may be challenged in the courts on three
Reforms,
52 Natl. Tax. .1 99, 107 (Mar. 1999).
193.
Woodward, supra n. 192, at 70. Local governments have the “proprietary
power to charge user fees for government-owned facilities and services ...
[and] police power to protect the public by means of ... regulatory
fees.” Id.
194.
Id. at 71.
195.
Id. at 70. The problem arises because the State Constitution guarantees a free
public education, and impact fees levied by the school board may be seen as an
impermissible school user fee or tuition charge. Id. Article IX, Section 1 of
the Florida Constitution states that “[a]dequate
provision shall be made by law for a uniform ... system of free public schools.
. .
196.
Woodward, supra n. 192, at 70. Because “school districts have no
police power authority to regulate land use,” and only counties and
municipalities have that power, school districts “have no power to
impose fees on land development.” Id.
197.
See id. at 73 (stating that the implementation of school impact fees
“continues to be an experiment each county must conduct for
itself”). Small rural counties with less financial resources
“are being faced with the task of adopting impact fees in order to
deal with the formidable costs of the rapid population influx.” Id. at
75. See e.g. id. at 71-72 (discussing Putnam County’s attempt to
charge user fees in a rural area with a median home value of $49,900); see also
Leroy Collins Inst., supra a. 26, at 21 (stating that “[r]oughly a third of [Florida’s] county-wide [school]
districts now charge a fee specifically for schools”).
198.
Snyder & Bird, supra n. 102, at 25 (stating that impact fees tend to be
more burdensome on low-income property owners). Impact fees “are
usually passed on to consumers,” and “are volatile income
streams dependent on the growth of the building industry.” Denslow & Weissert, supra n.
19, at 43. Furthermore, “[g]roups concerned
with affordable housing are worried that impact fees push lower-income working
families out of the owner-occupied housing market.” Id.
[*546]
grounds: whether they have been authorized by state statute, whether they
violate the Equal Protection Clause because they discriminate between existing
and new developments, and whether they are an unreasonable exercise of police
power.199 The trend has been for the courts to uphold impact fees as long as
the fees are appropriately set, because there is a public perception that new
growth pays for itself 200
2.
Increasing Existing Taxes or Imposing New Taxes
Increasing
the sales tax is a suggestion that routinely appears when alternative sources
of revenue are discussed, even though Florida already relies heavily on the
sales tax.201 Even with an increase in the sales tax, it is impossible to
predict whether the sales tax can be a long-term stable revenue source.202
During times of recession, sales tax collections decrease dramatically, because
people buy fewer durable goods, defer purchases of
199.
Snyder & Bird, supra n, 102, at 28-29.
200.
Id. at 27, 29-30. “While the perception is that new growth pays for
itself, the statistics tell a different story. Although there have been many
studies, there is “no agreed-upon answer, to the question of what it
takes in impact fees for growth to pay for itself.” Leroy Collins
Inst., supra n. 26, at 20. In addition, there is a potential for fiscal
disaster in counties that depend too heavily on impact fees. Denslow & Weissert, supra n.
19, at 43. Because impact fees depend heavily on the housing industry,
“[aJ county could find itself in a fiscal
crisis if there is a rise in interest rates or any other shock to the housing
market.” Id.
201.
Blanton, supra n. 3, at 445-446; see also Denslow
& Weissert, supra n. 19, at 24 (stating that the
sales tax is one of two taxes that raise the most local government revenue in
Florida).
202.
See Blanton, supra n. 3, at 448-449 (stating that sales tax revenue is not
keeping pace with the growth of Florida’s economy). While the housing
boom and rising tax rates have kept the sales tax as a strong revenue source,
“{e]xperts on sales taxes think that states
will be forced to rely more and more heavily on income taxes... [because the]
sales tax base ... is eroding.” Denslow
& Weissert, supra n. 19, at 14, 33-34. Experts
argue that “decline in the ratio of goods to services in consumer
spending,” pressure from citizens’ groups, the competitive
advantage of Internet vendors, and the fact that businesses, not consumers, end
up paying many of the sales taxes, are all efficiency arguments against heavy
reliance on the sales tax. Id. at 34. In the alternative, there are scholars
who believe that Florida is not a low-tax state in comparison to other
southeastern states, that Florida’s tax structure is effective, and
that the State is prepared for the financial demands of the twenty-first
century. E.g. Randall 0. Holcombe, Is Florida’s Tax Structure Ready
for the 21st Century? 3 (James Madison Inst. Policy Rpt. #42 Dec. 2004)
(available at http://www.jamesmadison.org/pdf/materials/298.pdf)
(asserting that Florida’s total revenues are growing along with the
economy and that the current taxation system is structurally sound). Scholars
note that the revenue generated from the sales tax has doubled since fiscal
year 1990-1991 and revenues per person have increased. Id. at 8-9. They also
argue that Florida’s economic shift toward a service economy does not
cause a problem for Florida’s tax base. Id. at 6.
[*547]
non-durable goods, delay or eliminate recreational expenditures, and reduce
business investment, thereby resulting in fiscal crises.203 Furthermore, like
California’s Proposition 13, Save Our Homes and an increased homestead
exemption may actually encourage local governments to act imprudently where
reliance on sales taxes is concerned.204 It is argued that in California,
the
reliance on sales taxes to replace lost property tax revenues has motivated
planning and economic development decisions that sacrifice the long-term fiscal
and environmental health of communities for short-term gains in sales taxes
producing land uses like shopping centers, car dealerships, and large-scale
discount retailers 205
The
result is that cities compete with each other to attract the types of
businesses that generate large amounts of sales taxes, thus sacrificing quality
of life for strip malls.206 In general, an over-reliance on the sales tax can
cause the fiscalization of land, which will
“devalue a community’s existing businesses, fail to favor
beneficial housing and manufacturing developments, and lead to declining
property values for nearby residents.”207 Florida voters must decide
whether reliance on the sales tax in exchange for quality of life is worth a
few hundred extra dollars per year.
203.
Blanton, supra n. 3, at 447-448. In addition, in Florida “[t]here is
the danger the housing boom will lull [policymakers] into complacency .... The
costs are the gradually declining levels of public services as government
operations are stretched thin and infrastructure is increasingly
crowded.” Denslow & Weissert,
supra n. 19, at 14.
204.
Schwartz, supra n. 129, at 183-184; see Tamman &
Braga, supra n. 168 (stating that the Save Our Homes amendment
“hasn’t forced county officials across the state to curtail
their spending ... [and] tax increases .., are outpacing growth and
inflation”). Some critics feel that “Save Our Homes gave
elected officials tacit permission to raise taxes year after year ..,
.” Id. See also Denslow & Weissert, supra n. 19, at 14 (noting that “all
governments should strive to improve the efficiencies of their taxes and
services, but their leaders face political and practical constraints hampering
such efforts”); Therese J. McGuire, Proposition 13 and Its Offspring:
For Good or for Evil? 52 Natl. Tax. J. 129, 130 (Mar. 1999) (stating that even
though public finance economists like the argument that fiscally empowered
local governments are held accountable by citizens voting for spending
practices, “[l]ocal elected officials may be
no more immune than state and federal officials to the temptations of using the
public purse for personal gain”).
205.
Schwartz, supra n. 129, at 184. “The fundamental conflict inherent in
Proposition 13... is the impulse among voters to reduce taxes while protecting,
or expanding, most government spending programs.” Id. at 187.
206.
Id. at 184.
207.
Id. at 201-202. In addition, the poor, who are more dependent on public
services than the wealthy, would be directly impacted by service cuts. Id. at
188-189.
[*548]
One highly unpopular alternative for raising local government revenue is the
imposition of a state income tax. The Florida Constitution currently prohibits
a personal income tax,208 which “is considered to be a political
‘bombshell.’”209 Because imposing the tax would
require a constitutional amendment, it is unlikely that voters will impose such
a tax on themselves.210 However, there has been discussion that Florida no
longer needs the lack-of-state-income-tax benefit to attract wealthy investors
to the State, and that an income tax could be structured in a way that would
meet the State’s revenue needs and provide a tax restructuring, rather
than a tax increase, to property owners.211
A
restructuring of Florida’s estate tax could also help replace lost
revenue if the homestead exemption should increase. Florida’s current
estate tax structure is often described as a “pick-up” tax,
because it only allows the state to collect, or “pick up,”
death taxes that are otherwise due to the federal government.212 If the homestead
tax exemption were to increase, a perfect opportunity would present itself for
the State to enact a new estate tax. Even
208.
Fla. Const. art. VII, § 5.
209.
Blanton, supra a. 3, at 460 (citations omitted). Florida is one of the few
states that do not have a state income tax. Id, at 446. Besides Florida, eight
other states do not impose a state income tax: Alaska, Nevada, New Hampshire,
South Dakota, Texas, Tennessee, Washington, and Wyoming. IRS, States without a
State Income Tax, http://www.irs.gov/efile/article/0,,id=130684,00.html
(accessed Jan. 16, 2006).
210.
Blanton, supra a. 3, at 460. State leaders have said for many years that
“the time has come to stop selling the state as a cheap
paradise.” Id. Florida originally expressed such strong anti-tax
sentiments in order to attract wealthy investors to the State. Id.
211.
Id. at 460-461. However, some argue that “[w]ith
so many visitors and temporary residents, Florida would be foolish to attempt
to impose an income tax.” Denslow & Weissert, supra n. 19, at 15.
212.
Edward F. Korea, The Florida Estate Tax, in Florida State and Local Taxes vol.
1,
55,
55, 12.01 (Fla. B. 1984). The Constitution prohibits “imposing any
death taxes on the estates of Florida residents in excess of the applicable
federal credit for state death taxes.” Fla. Const. art. WI, §
5(a). This means that the “Florida estate tax is directly linked to
the federal estate tax... [and] if no federal estate tax is due, then no
Florida estate tax [is] due.” Benjamin A. Jablow,
The Ins and Outs of the Florida Estate Tax, 79 Fla. B.J. 41, 41 (Jan. 2005). If
a federal estate tax is due, then Florida collects the amount of the federal
tax credit allowed for state death taxes. William 5. Forsberg, The
Snowbird’s Plight: Migratory Minnesotans Must Beware Where They Land,
61 Bench & B. Minn. 32, 33 (Apr. 2004). However, the Federal Economic
Growth and Tax Relief Reconciliation Act of 2001 virtually eliminated the
Florida estate tax, because the Act phased out the federal tax credit for state
death taxes over a four-year period. Id. at 33-34. The sunset provisions in the
Act allow the Florida estate tax to return in 2011, unless Congress takes
further action to eliminate state death tax credits completely. Jablow, supra a. 212, at 44.
[*549]
under the current constitutional limitation on the estate tax,213 the
Legislature could “pick up” another portion of the federal
estate tax, such as the deduction for state inheritance taxes.214 Arguably, a
change like this runs contrary to constitutional philosophy because, unlike a
credit, a deduction is not a dollar-for-dollar offset.215 In addition, some
have argued that Florida may be better off allowing the estate tax to remain in
its current form, even if the State is losing revenue, because the lack of
estate taxes may attract more residents to Florida.216 Analysts have forecasted
that states like Florida may see an increase in new residents as people
relocate from states that impose death taxes.217 If this is true, Florida may
not need to bring back the estate tax to make up for lost revenue from an
increased homestead exemption. However, one should keep in mind that although
new residents generate additional revenue for the State, they also place more
demand on existing infrastructure, and new infrastructure must be built to
accommodate them.218
Another
option for generating additional revenue is for Florida to increase or enforce
the use of its intangibles tax. Most Floridians are completely unaware that
Florida is one of the only states that imposes an intangibles tax, and some may
not even be aware that they legally owe the tax.219 In fiscal year 2001-2002,
213.
See supra n. 212 (explaining Florida’s current estate tax structure).
214.
Interview with Prof. Thomas Allison, Prof. of L., Stetson U. College of L.
(Mar. 9, 2005) (notes on file with Author).
215.
Id.
216.
E.g. Susan K. Hill, Student Author, Leaping Before We Look? Repeal of the State
Estate Tax Credit and the Consequences for States, Americans, and the Federal
Government, 32 Pepp. L. Rev. 151, 174 (2004)
(explaining that states like Florida that have not changed their estate tax
system in response to the federal phase-out “are being hailed as
estate friendly and favorable to residents”).
217.
Id. at 174-175.
218.
Supra pt. 111(B) (discussing the demands that Florida’s population
influx places on the State’s infrastructure).
219.
Randall G. Holcombe, Florida’s Intangibles Tax: The Case for Repeal 8
n. 6 (James Madison Inst. Policy Rpt. #40 June 2003) (available at http://jamesmadison.org/pdf/materials/134.pdf).
It has been reported that “[w]hile a few
states tax intangible assets to some degree, no state has a tax similar to
Florida’s. Four states have repealed intangible taxation since 1995
— North Carolina, Georgia, Kentucky, and
West Virginia.” Fla. Intangibles Tax Task Force, Final Report of the
Florida Intangibles Tax Task Force 1 (Mar. 1998) (available at http://floridataxwatch.org/resources/pdf/ITREP.pdf)
Florida’s intangibles tax is an annual tax on stocks, bonds, limited
partnerships, and other specific financial assets; thus, the tax targets
wealthy residents. Holcombe, supra n. 219, at 2, 6. Eighty percent of assets
subject to this tax are stocks, with bonds making up most of the
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the “[t]otal revenue from the intangibles
tax was $783 million,” but this amount “decline[d] to about
$600 million in [2003-2004] because of the scheduled increase in exemption
levels. 11220 Because the revenue raised under this tax currently accounts for
less than two percent of Florida’s total budget,221 additional revenue
for local governments could be raised by increasing the intangibles tax and
ensuring the accurate reporting of assets. However, scholars argue that the
“burdens the intangibles tax places on Florida’s economy are
greater than the benefits from the revenue it generates,” and that a
repeal of the tax would be more beneficial for the State.222
Finally,
an obvious alternative would be for counties to raise millage rates, assuming
that they can still do so. Many of Florida’s smaller or more rural
counties are already at, or are approaching, their millage rate limits.223
Overall, increasing millage rates is just a temporary solution to a much larger
problem. “Florida’s cities and counties have absorbed an
unpredicted, indeed unpredictable population increase in the last [thirty]
years, a population that is far from homogeneous in language, culture, or
remainder. Id. at 3, Currently, the annual tax on
these assets is one mill, but there are exemptions from the tax that have
increased dramatically in the past few years. Id. at 2. An exemption of $250,000
per person became effective in 2003, as well as a $250,000 exemption for
businesses. Id.
220. Holcombe, supra n. 219, at 2.
221. Id.
222. Id. First, the intangibles tax “is a tax
on saving and investment” because it taxes those who hold financial
assets. Id. at 6. Thus, the tax “discourages economic growth and
discourages wealthy people from living in Florida” and
“creates a disincentive for all Floridians to invest in assets that
will be taxed.” Id. In addition, there are many ways to legally avoid
the intangibles tax; thus, wealthy people who can afford accountants and
financial planners often do not pay the tax, leaving seniors and retirees to
pay the tax on their hard-earned retirement savings. Id. This is poor public
policy. These seniors are the very people that Florida should be working to
attract, because the taxes they pay exceed their cost in state expenditures.
Id. Furthermore, Florida’s reporting requirements are a nuisance to
the taxpayer and costly to the Department of Revenue. Id. at 5-6.
It is believed that eliminating the intangibles tax
would not cause a reduction in the State’s budget, because the
State’s tax revenues would ultimately increase due to the
State’s economic growth, especially if the private sector can save and
invest without the burden of the intangibles tax. Id. at 7. Therefore, the
weightier argument is that the intangibles tax is a huge burden on the State in
exchange for a small return, which supports the notion that increasing or
enforcing the intangibles tax is not the most efficient replacement for lost
property tax revenues. Id.
223. Supra nn. 110-114 and
accompanying text (discussing millage rates in Florida’s counties).
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needs for government services.”224 Increasing millage rates, while
doing nothing to address the underlying problem of too much double-dipping into
local governments’ pockets, merely sets up future generations of
Floridians for a quagmire of infrastructure, public school, and basic services
shortages and problems.
V.
POLICY IMPLICATIONS
Beyond
the practical effects of an increased homestead exemption are the policy
considerations that underlie the purpose of the constitutional structure of
taxation in Florida. On one hand, the historical purpose of the homestead was
to protect the family home and to keep residential property off the tax rolls
as a safety net for lower-income families.225 However, did the framers of
Florida’s Constitution intend for young families and recent homebuyers
to be responsible for the majority of the tax burden? No — these were the very people that the framers wanted
to protect from financial burden.226 In addition, one of the oldest principles
of property law is that property should be freely alienable, but
Florida’s system of taxation can actually discourage property
transfers, because sellers are reluctant to leave their tax shelters for new
homes when their taxes may double or triple.227
Next,
should an increase in the exemption take effect, owners of high-value homes,
rental and investment property, businesses, and anyone who chooses to purchase
a different residence will shoulder even more of the tax burden.228 In a State
that relies on the sales tax and buying power of individuals for revenue
generation, is it not bad public policy to heavily tax those with the most
224.
Joni A. Coffey, The Case for Fiscal Home Rule, 71 Fla. B.J. 54,56 (Apr. 1997).
225.
Supra pt. 11(A) (setting forth the origin and purpose of the homestead exemption).
226.
See Law v. Law, 738 So. 2d 522, 525 (Fin, 4th Dist. App. 1999) (stating that
“the purpose of the homestead exemption... [is] so that the homeowner
and his or her heirs may live beyond the reach of financial
misfortune...”); Cooper & Marks, supra n. 5, at 759 (asserting
that one intended purpose of the homestead exemption was to protect the
owner’s heirs).
227.
See Braga, supra n. 156 (noting that because of Save Our Homes, people who want
to move to a different home are staying in their current home to avoid paying
substantially higher taxes on the new home). When people feel that they cannot
afford to move because their tax bill will double or triple, there are fewer
houses for sale and prices rise because supply is limited. Id. See also
LaFrance, supra n. 24, at 844 (discussing the disincentives to buying and
selling property subject to an acquisition-value taxation system).
228.
Supra pt. IV(A) (discussing the disproportionate tax burden on certain property
owners).
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spending power? Persons who own real estate or small businesses, as well as
those who move to new residences, are contributing heavily to the
State’s economy, whereas those who are discouraged to move because of
the current tax system are paying a disproportionately low share of property
taxes.
Furthermore,
charitable, religious, and other exempt properties are not necessarily exempt
from special assessments, user fees, or other charges that governments may
impose to recoup lost revenue.229 If public policy warranted that these
entities should pay a share of the tax burden, then they would be required to
pay property taxes on their land like any other property owner. But society has
decided that these entities provide benefits to the community that are worth more
than requiring them to pay property taxes. However, by allowing and encouraging
the imposition of special assessments and user fees, these entities are
essentially losing their tax-exempt status.23¡
Other
policy concerns lie in the constitutional homestead exemption provision itself.
Many, including then-Florida Supreme Court Justice Grimes, believed that Save
Our Homes met the criteria to trigger the homestead
“repealer” in the Constitution and that the exemptions in the
Constitution would be rendered meaningless by allowing both systems of property
assessment to co-exist.231 Although a majority of the Florida Supreme Court
ultimately held that the Save Our Homes amendment would not trigger the
“repealer” under the plain language of the constitutional
provision,232 the co-existence of the Save Our Homes Cap and the homestead
exemption have eroded the ability of local governments to collect revenue, a
power also granted in the Constitution.233 Numerous constitutional revisions
limiting local taxing
229.
Dubov, supra n. 11, at 1488.
230.
Id. at 1490.
231.
Flu. League of Cities, 607 So. 2d at 397, 404 (Grimes, J., dissenting).
“If the amendment passes, any homestead property which appreciates by
more than [three percent] of the prior year’s assessment will have to
be assessed at an amount which is a specified percentage of its just value. It
is illogical to conclude that the repealing sentence of section 6(d) only
becomes activated by an amendment which requires an across-the-board reduction
in homestead assessments.” Id. at 404. See also Dubov,
supra n. 11, at 1489-1490 (discussing how provisions in the Constitution are
becoming meaningless because courts routinely allow local governments to fund
community-wide services though special assessments).
232.
Fla. League of Cities, 607 So. 2d at 401.
233.
Fla. Const. art. VET, § 9(a).
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authority have left local governments with no financial planning tools, and in
passing these amendments, little thought was given to the needs of counties and
local governments twenty to thirty years down the road.234 It is poor public
policy to leave the next generation worse off than the one before.
The
fact remains that every resident of Florida, wealthy or poor, is owed the
provision and protection of government services. Revenue generated from the
sales tax has increased, and revenue per person has increased over the past
decade, but Florida’s population and demand for infrastructure and
government services has also multiplied. A tax structure that depends so
heavily on the sales tax may provide ample revenue during times of economic
health, but in times of economic downturn consumers will be more conservative
with their buying power. The Author believes that Florida should not take a
“wait and see” approach. Instead, Florida should enact sound
financial-planning laws now that will enable the State to continue to be
attractive to current residents, residents seeking to relocate, and tourists,
but at the same time will allow local governments to collect the revenue
necessary to maintain and expand the state’s infrastructure.
VI.
ALTERNATIVE PROPOSALS
Floridians
should examine California’s history with Proposition 13 and understand
that, notwithstanding an increased homestead exemption, Save Our Homes alone
limits local government revenue to the point that residents trade quality of
life and public services for tax savings. Whether one agrees with an
acquisition-value taxation system will most likely depend on one’s
economic situation and stage of life, and one’s opinion about this
type of tax system can shift with changes in financial circumstances. It may be
that Floridians as a whole prefer the acquisition-value type system, and if
that is the case, then the homestead tax exemption’s time may have
passed. There likely will come a time when Save Our Homes and the homestead tax
exemption cannot continue to co-exist and still provide local governments with
the
234.
See Coffey, supra n. 224, at 55-56 (discussing the effects of constitutional
revisions on local governments’ ability to meet their fiscal needs).
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revenue they require to support the rising need for infrastructure and basic
public services.
The
Author’s first suggestion for redesigning the tax structure is for
voters to repeal either the homestead exemption or the Save Our Homes Cap,
after the Constitutional Revision Commission or a Task Force determines which
would be more beneficial in the long term for property owners-including small
businesses and commercial property owners-and local governments.235 Another
alternative would be to repeal the constitutionally imposed tax structure and
allow the amount of the homestead exemption and Save Our Homes Cap to be
determined by the Legislature, giving legislators the freedom to determine
exemption levels based on changes in the state economy. Of course, this would
“fly in the face of” Floridians’ history of
expressing anti-tax sentiment through the Constitution,236 but it would still
allow the people to speak through their elected representatives. The
Legislature and local governments, and effectively their constituents, would
then have control in deciding whether to raise millage rates beyond ten mills,
implement a state income tax, or raise the cap limit on Save Our Homes to meet
financing needs.
One
widely discussed proposition is a graduated scale for the homestead
exemption.237 Under this system, the exemption’s maximum amount would
be tied to “the average cost or value of
235.
The Author realizes that it is highly unlikely that Florida voters would repeal
either the Save Our Homes Cap or the homestead exemption, and even more
unlikely that a political candidate would propose such a constitutional amendment.
E.g. Maurice Tamman & Michael Braga, Portable Tax
Break Seen As Fix, Mistake, Sarasota Herald-Trib. A1
(Sept. 24, 2005) (quoting Lake County Property Appraiser Ed Havill,
who when asked about doing away with the Save Our Homes Cap stated,
“Nobody wants to shoot Santa Claus and lose the next
election”). What is more likely, however, is that voters would enact a
“portable” Save Our Homes Cap, which would “allow
homeowners to keep their tax break when they move to a new home in the
state.” Id. Ken Wilkinson, Lee County Property Appraiser and one of
the original proponents of Save Our Homes, supports a portability amendment for
the 2006 election ballot. Id. However, this amendment would just further
compound the problems already presented in this Comment, including more of the
tax burden being placed on non-homesteaders, renters, businesses, and
commercial property owners and creating more inequalities and problems for
Florida’s economy and local governments. Id.
236.
Dubov, supra n. 11, at 1507 (stating that
“creative attempts to generate revenue sometimes fly in the face of
constitutional provisions adopted by the citizens of Florida specifically to
limit local government ad valorem taxing powers”).
237.
Blanton, supra n. 3, at 462. In the mid-1980s, before Save Our Homes was
passed, the Taxation and Budget Reform Commission discussed a variety of
options for proposed changes to the homestead exemption. Id.
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housing in the county.”238 The logic is that this type of formula
“would reduce the exempt amount in rural or slow growing counties
where property values are low and increase the exempt amount in large, fast
growing counties.”239 Another proposal indexes the homestead exemption
to inflation or increases in property values, and would be designed to
“prevent the erosion of the relative value of the
exemption.”240 Furthermore, the property tax could be made more
progressive by “phasing out the homestead exemption for properties with
high values.”241 This type of phase-out would prevent wealthy
homeowners from using their home as a tax haven.
If
Floridians value equal taxes for similarly situated properties and permanent
residents’ contributions to the State, a homestead exemption that is
tied to the rate of inflation and average housing values, in lieu of the Save
Our Homes Cap, would provide both. While saving on property taxes through the
Save Our Homes Cap is beneficial to property owners who do not intend to move, a
homestead tax exemption that was instead tied to inflation would not create the
type of disparities in tax treatment that point to possible equal protection
violations.242 This proposal could achieve much of the same benefits as Save
Our Homes, yet would not create as much disparity and resentment between owners
of similar properties.243 It is likely that the only way to per-
238.
Id.
239.
Id.
240.
Id. The proposal more commonly discussed was to tax the “first
increment of value (such as the first $5,000, $10,000 or $15,000) and then
apply[ I the exemption.” Id. However, this proposal would actually
make the property tax more regressive and would negate the underlying purpose
of the homestead exemption-to protect low-income families from losing the
family home. Id.
241.
Id. Even though this proposal might seem to treat all property owners
unequally, .we can... agree that a millionaire is differently situated than a
person living below the poverty level. Even if the poor person could pay the
same tax as the millionaire, we can agree that their different circumstances
justify making the millionaire pay more taxes.” John A. Miller, Equal
Taxation: A Commentary, 29 Hofstra L. Rev. 529,
544-545 (2000).
242.
Supra pt. W(A) (discussing possible equal protection violations posed by Save
Our Homes).
243.
Had the Budget and Reform Commission enacted one of these changes in the 1980s,
it is possible that Save Our Homes would not have been necessary. Floridians
concerned about increasing property values took the matter into their own hands
instead of waiting for the Legislature to react. Blanton, supra n. 3, at
456-457. Some Florida government leaders also believe that “the state
is teetering on the edge of a crisis.” Tamman
& Braga, supra n. 235 (quoting Sarasota County Administrator Jim Ley, “The Florida property tax system sucks...
Save Our Homes has created a train wreck in our tax base”).
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-suade Floridians to repeal the Save Our Homes
amendment and retain the homestead exemption would be to provide a homestead
exemption benefit that correlates to property value.2
VII.
CONCLUSION
Because
of Florida’s rapid population influx and increasing demand for
infrastructure, increasing the homestead exemption would be unfavorable to the
ability of local governments to generate revenue and may actually cause
taxation by other, less obvious means. If an amendment to raise the exemption
appears on an election ballot, it is imperative that Florida voters understand
the significance of their affirmative vote. Voters may unwittingly be voting to
impose special assessments, impact fees, or even a state income tax on
themselves in the future, or may be voting to sacrifice quality of life and
green space for shopping malls and car dealerships.245
The
Author questions whether the Save Our Homes Cap and homestead exemption can
continue to co-exist and generate property tax revenue sufficient to meet local
government needs without creating equal protection problems or imposing
unconstitutional taxes on property owners. An alternative would be for Florida
voters to select one or the other, possibly repealing the Save Our Homes Cap in
favor of an indexed or graduated scale homestead exemption that correlates to
housing values and inflation. The Author’s other suggestion is to
amend the Constitution to give local governments more power to create
alternative sources of revenue or to repeal the constitutionally imposed tax
structure altogether.
Finally,
it is certain that there were enough signatures on the citizen initiative
petition in 2004 to place an amendment of this nature on the election ballot.
If another group or political action committee proposes a similar amendment in
the future, which is likely, and the amendment appears on the general election
ballot, it has a high chance of success for two reasons. First, Florida vot-
244.
See Blanton, supra n. 3, at 462 (noting that, in 1986, voters
“strongly indicated their unwillingness to give up any part of the
exemption, despite widespread publicity about the number of rural residents who
pay no property taxes whatsoever”).
245.
See Schwartz, supra n. 129, at 184 (discussing the trade-offs that occur when
local governments are forced to rely on sales tax revenue to replace property
tax revenue).
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-ers have a history of passing constitutional
amendments.246 Second, the average homeowner sees “tax
relief” in bold print and automatically thinks that the amendment will
translate into more money in his or her pocket. Hopefully, the Florida Supreme
Court will again be able to strike down this type of amendment as misleading,
or voters may learn, too late, that they were misled.