Florida Property Tax Proposal Stirs Interest, Controversy

Real estate agents throughout Florida are cautiously embracing a proposed plan to eliminate all property taxes on primary residences, at the same time limiting the amount of tax local governments could collect.

The controversial new plan, sparked by soaring Florida mortgage, insurance and local tax costs hampering the real estate market, was unveiled by the Florida House earlier this week, the Sarasota Herald Tribune reports.

“For Realtors, and people who market the state, the lack of a state income tax is a marketing tool, no question,” opined spokesman Trey Price of the Florida Association of Realtors.

“If the House proposal were passed, and there were no property tax, that would be a very strong marketing tool, as well.”

House leaders propose a sweeping plan that would jack up the state’s sales tax rate to the highest in the nation, in exchange for reduced or no real estate taxes. They feel that reducing property taxes would ease the burden homeowners already feel from soaring home mortgage loan costs.

In most areas of the Sunshine State, the sales tax would be pushed to 8.5 percent. By comparison, the California state tax on consumer purchases is now the highest in the U.S., at 7.25 percent.

House lawmakers estimate the change would generate nearly $8 billion in new Florida sales tax in the first year the measure was in effect. At the same time, residents and taxpayers would save almost $6 billion.

It sounds too good to be true, and it may be. Though there’s no escaping the fact that the average homeowner - whose property is protected by Save Our Homes legislation - would save nearly $2,300 annually.

Although the concept of halting the escalations in mill rates that have taken a toll on homeowners since 2002 isn’t new - Gov. Charlie Crist revealed his own plan a few weeks ago - the plan was both surprising and dramatic.

But not to Realtors. House leaders approached the Florida Association of Realtors a few weeks ago about the concept. Price said the group is “very intrigued.”

Other prominent Realtors, however, said they aren’t ready to endorse the House concept.

“It’s short-term thinking vs. long-term,” said Budge Huskey, president and chief operating officer of Coldwell Banker Residential Real Estate, among the largest groups of real estate agents in Southwest Florida.

“There’s no question that if you announce a rollback in taxes, it’ll spark additional investment and purchases,” Huskey said.

“On the other side of the table, sometimes when projections are made on how much money could be raised, you can’t always rely on accuracy. Eventually, it becomes a quality of life issue.”

Local Realtors agreed that property taxes are among several factors having the most severe impact on the state’s languishing housing market, which is not picking up steam in 2007 even as home loan rates remain low.

“We recognize something needs to be done about both taxes and homeowners insurance, because they are dramatically affecting how people look at home ownership,” said Joe Hembree of the Sarasota Association of Realtors.

“That said, sometimes things that look good on the surface often have unforeseen complications.”

“The fact that the Florida State Legislature is looking to do something is a great thing,” said May Aston of Manatee Association of Realtors. “We all want something to happen with runaway taxes, but it has to be the right thing.”

Aston said the Manatee Realtors, like their counterparts in Sarasota and throughout the state, intend to study the issue further before deciding whether to back the House proposal.

Will this alleviate any of the strain faced by would-be mortgage loan applicants in Florida? Is it just a quick fix or potentially a solid, long-lasting solution? It will be interesting to watch.

SOURCE: Sarasota Herald-Tribune