This is not the case as our Florida legislature convenes once again to attempt to scrounge up money to pay for essential services. Faced with a budget shortfall of $6.1 billion and unable to meet their planned $73.7 billion budget, the Florida legislature is considering proposing a higher tax on vehicles and cigarettes to bring in more revenue. (See Sun Sentinel article dated 4/17/09.)
So, what happened? Where did all the money go?
It’s simple, really. It was never collected.
Florida taxes their residents lower than 44 of the 50 states and instead relies on sales tax, corporate income and excise tax, document stamps, and other sources to provide the revenue to run the government.
All individual tax is on property, not income. That's right, no income tax.
In 2006, Florida property was valued at $2.4 trillion and is taxed at 1.7% on average. Using these figures, a measly $40.80 billion should have been collected in 2006. (To wrap your head around it, think of it as $40.80 collected on $2,400).
But wait. It gets worse. Turns out that the $2.4 trillion wasn't completely taxed. Exemptions were applied. According to the Property Tax Administration's 2006-2007 report, “Due to various statutory exemptions and exclusions, the taxable value of Florida’s real property in 2006 was $1.79 trillion, resulting in more than $30.4 billion in property taxes levied by local governments and taxing authorities.” Somewhere, we lost $10.4 billion in taxes. That would have easily made up for our $6.1 billion tax revenue budget shortfall this year.
This may sound great to you. You might think, “Oh, I’m going to move to Florida and get away with paying less tax.” Florida does have more than its share of multi-millionaires who claim Florida as their legal residence for this very reason, including Mr. Anti-tax himself, Rush Limbaugh. (See Wiki.answers.com)
But really, luck really is what determines your tax rate. Nothing more, nothing less.
In Florida, the population is not equally taxed. Some residents pay a great deal more than others, and not because they earn more money or live in nicer homes.
How much you are taxed depends in part on what year you bought your home and applied for the "homestead" valuation cap and exemptions. My investment accountant back in Seattle calls this a "Yankee tax," since it unfairly burdens newcomers to Florida. I like to call it a "stick it to the new guy" tax. It also burdens first time home buyers, even those who have lived in the state of Florida for all of their lives.
What is "homesteading?" In 1995, the voters of Florida passed legislation called “Save Our Homes” which locked in tax rates for residents so that they wouldn’t be taxed out of their homes when property values soared. It sounded like a good idea, capping increases in values at a maximum of 3 percent each year. So, if you bought your home in 2000 for $100,000. You would get a $25,000 deduction off that value and only pay tax on $75,000. And, next year, the property assessor would only be able to increase the taxable value on your home to $103,000, which is 3% of the value, even if the amount you could sell your home for might go up to $120,000.
However, “Save Our Homes” didn’t take into account that some people don’t need saving. In fact, every couple I know over 70 has a pension which pays more than my husband and I make combined. My father has a six figure pension. My mother-in-law makes more than my husband (she is a retired first grade public school teacher), and my next door neighbor, a retired GE employee, makes enough to buy investment apartment rental properties in full on a regular basis (I can only guess that his pension is sky high). These people all began working in the late 1940s and 1950s after World War II when benefits and pay were at an all time high.
So, where does "luck" factor into the equation? Despite good intentions, no legislation has been able to pin down a property assessor's variations in valuing properties.
Example: The homes listed above are both in Orlando, on the same block of Corrine Drive and on the same lot size and type; with the same 3602 gross sq ft and 2488 sq ft of living space. Both were built in 2004. Both owners purchased and lived in their homes since June of 2004 and are homesteaded. (I do not know either owner and apologize for using them as guinea pigs.)
However, one house has an extra bathroom. Can you guess which one? Most people would assume that this owner pays slightly more tax. No, for some odd reason, the opposite is true. The owner of the 2.5 bath house pays about $700 extra in property tax.
A rational person might assume that perhaps the interiors of the homes are different and one is much more posh than the other. That may be, but property appraisers don't get to see the inside of a home. They evaluate their assessments on the outside appearance and tangible descriptions only.
Actually, even the assessor's office admits that the house at 3961 Corrine Drive with 3.5 bathrooms is valued higher at $380K than the house at 3881 Corrine Drive with only 2.5 bathrooms, which the assessor values for resale at $375K. Resale estimates are called "just values" or "just assessments."
So, why the higher tax? The difference occurs in a line item called "assessed value." This is the amount you pay tax on and it can vary like the wind can shift. For some odd reason, the house with 3.5 baths and a just value of $380K, is only taxed on $311K. For some odd reason, the house with 2.5 baths and a just value of $375K is taxed significantly more at $350K, about $40K higher than the other house. Why the difference? I have absolutely no idea!
This is just one of the many, many odd tax evaluations I hope to uncover over the next few months in this blog. Fortunately, property taxes are public information and the government is required to disclose this information to the public. I think it helps keep them honest.
The Florida Department of Revenue mission statement
“To serve citizens with respect, concern and professionalism;
To make complying with tax and child support laws easy and understandable;
To administer the laws fairly and consistently; and
To provide excellent service efficiently and at the lowest possible cost.”
The Property Tax Administration
2006-2007 Annual Report states:
“The Property Tax Administration -- ensuring an equitable property tax system”
Source A: Income number based on 2007 census figures: In 2007, the population of Florida was about 18 million, living in about 6 million households. The average medium income was about $48,000 per household, which, when multiplied by 6 million, equals $288 billion total.)
All individual tax is on property, not income. That's right, no income tax.
In 2006, Florida property was valued at $2.4 trillion and is taxed at 1.7% on average. Using these figures, a measly $40.80 billion should have been collected in 2006. (To wrap your head around it, think of it as $40.80 collected on $2,400).
But wait. It gets worse. Turns out that the $2.4 trillion wasn't completely taxed. Exemptions were applied. According to the Property Tax Administration's 2006-2007 report, “Due to various statutory exemptions and exclusions, the taxable value of Florida’s real property in 2006 was $1.79 trillion, resulting in more than $30.4 billion in property taxes levied by local governments and taxing authorities.” Somewhere, we lost $10.4 billion in taxes. That would have easily made up for our $6.1 billion tax revenue budget shortfall this year.
This may sound great to you. You might think, “Oh, I’m going to move to Florida and get away with paying less tax.” Florida does have more than its share of multi-millionaires who claim Florida as their legal residence for this very reason, including Mr. Anti-tax himself, Rush Limbaugh. (See Wiki.answers.com)
But really, luck really is what determines your tax rate. Nothing more, nothing less.
In Florida, the population is not equally taxed. Some residents pay a great deal more than others, and not because they earn more money or live in nicer homes.
How much you are taxed depends in part on what year you bought your home and applied for the "homestead" valuation cap and exemptions. My investment accountant back in Seattle calls this a "Yankee tax," since it unfairly burdens newcomers to Florida. I like to call it a "stick it to the new guy" tax. It also burdens first time home buyers, even those who have lived in the state of Florida for all of their lives.
What is "homesteading?" In 1995, the voters of Florida passed legislation called “Save Our Homes” which locked in tax rates for residents so that they wouldn’t be taxed out of their homes when property values soared. It sounded like a good idea, capping increases in values at a maximum of 3 percent each year. So, if you bought your home in 2000 for $100,000. You would get a $25,000 deduction off that value and only pay tax on $75,000. And, next year, the property assessor would only be able to increase the taxable value on your home to $103,000, which is 3% of the value, even if the amount you could sell your home for might go up to $120,000.
However, “Save Our Homes” didn’t take into account that some people don’t need saving. In fact, every couple I know over 70 has a pension which pays more than my husband and I make combined. My father has a six figure pension. My mother-in-law makes more than my husband (she is a retired first grade public school teacher), and my next door neighbor, a retired GE employee, makes enough to buy investment apartment rental properties in full on a regular basis (I can only guess that his pension is sky high). These people all began working in the late 1940s and 1950s after World War II when benefits and pay were at an all time high.
So, where does "luck" factor into the equation? Despite good intentions, no legislation has been able to pin down a property assessor's variations in valuing properties.
Example: The homes listed above are both in Orlando, on the same block of Corrine Drive and on the same lot size and type; with the same 3602 gross sq ft and 2488 sq ft of living space. Both were built in 2004. Both owners purchased and lived in their homes since June of 2004 and are homesteaded. (I do not know either owner and apologize for using them as guinea pigs.)However, one house has an extra bathroom. Can you guess which one? Most people would assume that this owner pays slightly more tax. No, for some odd reason, the opposite is true. The owner of the 2.5 bath house pays about $700 extra in property tax.
A rational person might assume that perhaps the interiors of the homes are different and one is much more posh than the other. That may be, but property appraisers don't get to see the inside of a home. They evaluate their assessments on the outside appearance and tangible descriptions only.
Actually, even the assessor's office admits that the house at 3961 Corrine Drive with 3.5 bathrooms is valued higher at $380K than the house at 3881 Corrine Drive with only 2.5 bathrooms, which the assessor values for resale at $375K. Resale estimates are called "just values" or "just assessments."
So, why the higher tax? The difference occurs in a line item called "assessed value." This is the amount you pay tax on and it can vary like the wind can shift. For some odd reason, the house with 3.5 baths and a just value of $380K, is only taxed on $311K. For some odd reason, the house with 2.5 baths and a just value of $375K is taxed significantly more at $350K, about $40K higher than the other house. Why the difference? I have absolutely no idea!
This is just one of the many, many odd tax evaluations I hope to uncover over the next few months in this blog. Fortunately, property taxes are public information and the government is required to disclose this information to the public. I think it helps keep them honest.
The Florida Department of Revenue mission statement
“To serve citizens with respect, concern and professionalism;
To make complying with tax and child support laws easy and understandable;
To administer the laws fairly and consistently; and
To provide excellent service efficiently and at the lowest possible cost.”
The Property Tax Administration
2006-2007 Annual Report states:
“The Property Tax Administration -- ensuring an equitable property tax system”
Source A: Income number based on 2007 census figures: In 2007, the population of Florida was about 18 million, living in about 6 million households. The average medium income was about $48,000 per household, which, when multiplied by 6 million, equals $288 billion total.)
