Last-ditch tax debate pivots on who becomes fall guy

Article Courtesy of The Palm Beach Post


Published October 14, 2007


TALLAHASSEE — Millionaires can rejoice. Moderate-income homeowners can forget about any $2,000 tax cut.

And new home buyers peeved that their neighbors are paying only a fraction of their taxes? They'll have to get over it.

As Florida lawmakers settle down this week for their final run at a property tax plan for the Jan. 29 election, these appear to be the major differences between the "super" homestead exemption proposal crafted during the June special session and the one that will be discussed during the next several days.

That's because the new proposal does not include the two singular features of the earlier plan that was put together by Senate Majority Leader Daniel Webster: its application of the biggest tax cuts to lower-cost properties and its phase-out of the Save Our Homes cap on homesteaded property assessments.

"Listen, I liked the June proposal. That's why it was our first effort," said Rep. Dean Cannon, R-Winter Park and the House negotiator who worked with Webster. "I think that the economic policy that we crafted in the (June) special session was great. I think that this (new plan) is less than that, but it's still a step in the right direction."

Under the June plan, which had legal problems that led to this special session, the most dramatic benefit would have gone to the buyers of homes worth $200,000, who would have seen tax bills go from $2,975 down to $850, a savings of $2,125.

Under the new plan, the largest benefit goes to owners of homes with the $1 million in accrued Save Our Homes benefit who trade up to even more expensive homes. One million dollars in accrued benefit is the maximum that would be transferable to a new home under the proposal. The tax savings for someone making that move: $9,500.

And because the new plan leaves the Save Our Homes protection in place, it does nothing to prevent existing inequities where neighboring homeowners in identical houses pay vastly different tax bills, based solely on when they purchased their home.

Portability lawsuits feared

In fact, the new feature allowing portability of the Save Our Homes benefit could perpetuate the inequality indefinitely, with the largest tax advantage going to Floridians whose homes have seen the greatest appreciation since Save Our Homes took effect in 1994. That amendment limits annual assessment increases for tax purposes to the lesser of inflation or 3 percent.

That side effect - of creating a "founders effect" in which some residents are given a permanent tax advantage over others based solely on when they bought their homes - was the reason many lawmakers previously argued that adding portability would invite lawsuits and endanger the entire Save Our Homes policy.

The legislature consulted University of Georgia law Professor Walter Hellerstein, who issued a dire warning.

"We'll probably lose, and we'll probably owe tens of billions of dollars," Senate Democratic leader Steve Geller said of portability in February. "If we just bow to the political will of the bumper-sticker, we could have catastrophic damage."

Eight months later, Geller said it would be very difficult for him not to bow to the political will of his constituents, many of whom are clamoring to take their built-up Save Our Homes benefit to their next home.

"The biggest complaint I hear is that we're trapped in our home. We have to try and un-trap them," said Geller, of Cooper City. "It would be very tough to vote against this bill."

Gov. Charlie Crist said he has his own strategy to deal with the worrisome opinion: "Listen to smarter legal scholars than the one who's putting that out."

Crist's chief of staff, George LeMieux, said another feature of the proposal, a 25 percent tax exemption for first-time buyers, would reduce the preference given to longtime homeowners. That would be done by reducing the home's assessment by 25 percent of its sales price or 25 percent of the median home price in that county, whichever is less.

"For those who are concerned, that first 25 percent off on your first Florida home will help balance it," LeMieux said.

Some lawmakers privately concede that the new plan is winning support from some of their colleagues who dislike Save Our Homes and think that portability will make it so blatantly unconstitutional that it is certain to be struck down by federal judges.

"The decision seems to have been made to go with pure portability and roll the dice in court," Geller said.

Ruling provides opportunity

A Leon County circuit judge gave Crist and lawmakers this chance to start with.

Not a month ago, Crist was talking up the "super" homestead exemption, even as Republican Party polling showed that the public did not understand it and was inclined to vote against it.

At a Sept. 17 news conference in Tampa to announce the creation of a political committee to pass the proposed amendment, Crist said: "What people need is more of their hard-earned dollars in their pocket. And this tax-cut amendment Jan. 29 will do exactly that."

But a week later, when Judge Charles Francis tossed the amendment off the ballot, calling its ballot summary "misleading and confusing" because it did not make it clear to voters that Save Our Homes was being phased out, Crist quickly said the ruling was "a blessing in disguise."

And a week later, Crist learned from Geller during a conversation in the governor's Capitol suite just how important portability is to South Florida Democrats.

Democratic support for any proposal to replace the super exemption on the Jan. 29 presidential primary ballot is critical, because Republicans hold enough seats in the legislature to put a proposed amendment on the ballot but not enough to place one on any election other than a general election, which takes place every other November.

And that provided Crist an opening to push for the two ideas he campaigned on last year: portability and doubling the homestead exemption.

"My phone over the weekend was melting," he said, describing his personal lobbying on those two issues.

Crist said he thought it important to keep the replacement proposal simple and popular, to ensure it cleared the 60 percent vote threshold a constitutional amendment needs.

Webster, R-Winter Garden, said GOP polling showed Crist's plan winning support of more than 70 percent of voters - 22 points higher than the support for Webster's super exemption.

"It was going to be a hard sell," Webster said of the original plan, which he said was still financially better for more Floridians and a better policy.

Crist's bigger problem was the House, where Speaker Marco Rubio also wanted to revisit property taxes before the Oct. 31 deadline for getting a new question on the Jan. 29 ballot. But Rubio, R-West Miami, wanted to have an even larger package than the June proposal, which potentially could have cut $16 billion from the budgets of local governments and school districts.

During the regular legislative session last spring, Rubio stalled discussion and caused the June session by insisting that the state eliminate some property taxes entirely and raise the sales tax instead, an idea that most senators opposed.

This time, Crist told Rubio that his new plan was only a beginning, and that he would support other measures during the 2008 regular session and through the Tax and Budget Reform Commission, which can independently put questions on the November 2008 ballot.

It also helped, Crist said, that lawmakers had a limited window, through the end of this month, to add anything to the Jan. 29 ballot.

"I think the deadline was a help. I don't think there's any question about it," Crist said. "We know there's a sense of urgency in terms of being able to get this before the voters and put it in the people's hands, if you will. We have to work in a rapid fashion."

June plan still an option

House and Senate leaders released copies of the proposal Friday, and they plan committee meetings to discuss it starting Monday. The discussions are not expected to last long, with final floor votes expected Wednesday.

The outcome, however, remains uncertain. Geller said Friday that some Democrats, including him, are troubled by a plan that had grown from $4 billion over five years for portability plus some minor changes to closer to $10 billion, as the plan stood at the end of the week.

Senate President Ken Pruitt, R-Port St. Lucie, and Rubio set this latest special session, the fourth of the year, to run through Oct. 29, to cover any unexpected glitches.

But if the unexpected occurs and nothing passes? Crist and lawmakers still can fall back on the June plan, which has been turned back by only a single trial-court judge. They would have time to pursue an appeal vigorously.

"That could be reversed," Webster said.