Florida’s nonhomesteader snowbirds shafted again by new property tax Bill 381

In a nutshell

Don’t let the reduced cap from 10% to 5% of nonhomesteaders tax value increase fool you. Florida’s new property tax related Bill 381 is pretty much a losing proposition for Florida’s snowbirds, compared to the already terrible status quo. Homesteaders (H) win if prices continue falling and nonhomesteader (NH) snowbirds continue losing if prices start rising. Either way more of the load is being shifted to the nonhomesteaded property owners. Head I lose, tails you win. What a way to help attract new real estate investment necessary to soak up Florida’s inventory glut!

The details

Compared to the current state of affairs, with the just passed Florida Bill 381, if Florida home prices drop then homsteaders(H) are ahead, if property prices rise nonhomesteaders’ (NH) share of the tax load will increase further. Sounds like a losing proposition either way for nonhomesteaders (NH). According to Florida’s realtors, this will help them sell residential and commercial property to out-of-staters. I just can’t figure it out why (other than out-of-staters’ gullibility or ignorance).

If my understanding is correct, this Bill will actually make things worse for NH because:

What it says is that: (1) if market values fall, then H whose tax value is less then market value, will have tax value unchanged (i.e. no overall shift between H and NH tax allocation; this is worse than today, when a market value drop reduces the gap between H and NH by effectively shifting some of the tax base from NH to H given the current recapture provision, thus resulting in a reduction of unfairness toward NH), and (2) if market values rise, then NH’s tax value rises up to 5%, while H’s tax value rises up to the lower of inflation or 3% (net shift of tax base from H to NH if market value increases more than inflation or 3% whichever is smaller).

Furthermore: (1) new homesteaders get 5 year tax value reduction of 50%, 40%, 30%, 20%, and 10% (net shift of tax base from H to NH), (2) the reduction of NH cap from 10 to
5% has some illusory value (to realtors trying to persuade out-of-staters that there is improved tax equity) but in reality that’s not only a low probability scenario in the next 5-7 years, but it would just slow down the growing inequity between H and NH, (3) Florida residents who are  renters potentially get some new property tax relief (another transfer of tax load from Florida residents to NH).

The Bill comes with a 2023 sunset clause. Florida’s voters will have a chance to give the thumbs up or down on this constitutional amendment in November 2012.

The bottom line

The bottom line is that: (1) inequalities ($50K exemption, low tax values due to SOHA, portability) between H and NH stay locked in, (2) new tax base/load shifts are designed to favour homesteaders’ which will further increase the tax load on nonhomesteaders, (3) even the scrap thrown to nonhomesteaders, the reduction of tax value increase cap from 10% to 5%, will only limit the rate at which the tax base is being shifted from H to NH, rather than reduce the existing inequities.

So, where is the silver lining in this cloud? Prices up or down, nonhomesteaders will get shafted. (Thanks to property tax activist Bill Levison of Browact.com for bringing the Bill to my attention.)

P.S. There is still one way to at least mostly close the still gaping tax value gap that developed since SOHA was introduced between nonhomesteaders and some old time homesteaders; that would be a very painful further 30-50% drop in Florida’s real estate prices (this is not a prediction). But even that won’t eliminate the unfair load on Florida’s snowbirds; the $50,000 homestead property tax exemption will continue to protect that.