Portability is not the answer

In the next couple of days, we should have a better understanding of what Crist's tax plan will be. I say "Crist's" because it looks like the Republicans leaders are going to let him run the show. Rubio can't afford to screw up AGAIN on taxes (as this Sun Sentinel opinion piece points out, he's already on strike two), so it looks like he's giving the torch to Crist. Regardless of whether the plan succeeds, Rubio will claim it didn't go far enough next regular session and push for his sales swap again. Plus, Crist needs the credit - he's got campaign promises to fulfill if wants to keep his astronomical ratings. It doesn't matter to him whether or not the plan suceeds either; he just needs to show he tried. On the other hand, it's good to see that he's willing to talk to Democrats about it, unlike his Republican friends.

So what is Crist's plan? There are several reports. SV Date (freshly transfered to the legislative beat and already causing trouble for the Republicans) has a write up that focuses on portability and doubling the homestead exemption; The Miami Herald has a somewhat different report, The Buzz has something else, and the Political Pulse also chimes in. You can see the common threads, but the details are different.

The important thing is that portability is the primary element of all of these plans. As explained by Date, portability would allow accrued savings from Save Our Homes to be transfered, but they would slowly phase out as the assessment of the property would grow by 8% instead of 3%, until it reaches what the assessed value of the property would have been if it was allowed to grow at 3% from the sale value of the property, at which point it would only grow 3% a year from there on out. Did I explain that right? Did you understand it? Somehow they've managed to come up with something even more convoluted than the super exemption/Save Our Homes choice. That is, if Date's report is right.

Lets assume it's correct. That would mean that long-term residents get a bonus exemption, which could be enormous - millions of dollars, potentially - that would slowly phase out until they're just left with their regular old Save Our Homes cap. Fine, that solves the "problem" of people being "locked" into their homes (realistically, people locked into their homes from assessment caps should make such a profit from the sale that it should mitigate the increased taxes of a new place). But - well, think about it. What if you move multiple times over the course of a few years? What if you move from a really expensive home to a much more modest one? In other words, what if you move from a home valued at $2 million but assessed thanks to SoH at $500,000 to a house worth $500,000? You'd have $1.5 million accrued savings, which means you'd pay taxes on negative $1 million dollars assessed value... right? How does that work? What I'm trying to say is, the loopholes here seem enormous.

But that's not the main problem I have with portability. It exacerbates the problem of tax inequities. Basically, it means that the longer you lived in Florida, the less taxes you'll have to pay, even if you move homes. Lets face it, people wouldn't get "locked in" if there wasn't a homestead based cap. Other people (including renters and businesses) have to pay more taxes because homesteaders pay less. Portability solves the problem only between actual Florida residents. New-comers, landlords, and businesses still have to pay more so these people can pay less.

Of course, since people who qualify for homesteading vote the most, they're the ones who get pandered to. But, wiping out homesteading benefits along with another kind of tax reform (to compensate for the fact that you'd essentially be raising their taxes) is much more fair and won't cause the long term problems that an unequal system, like SoH, is responsible for. But who cares about the long term?

What kind of reform could compensate for loosing the SoH assessment cap? How about this very interesting idea from property appraisers: roll back assessments. I firmly believe that property taxes aren't the problem, it's the rapidly raising assesments that are the problem. They're behind both the increase in taxes paid by individuals, and the growth of local governments and the resulting pain from forced cuts (I mean, growing fast and then cutting back is more painful than just growing less fast). I don't know about the specifics of their plan, reducing assesments by 5% for 5 years, but that seems like a move in the right direction. Apparently, removing the "highest and best use" assesment requirement is on the table for Crist's tax reform, which is also a good thing.

Bottom line: individualized assessment caps are the problem, and portability is only going to perpetuate that. A better solution is needed.