Starting tomorrow, Florida lawmakers will take a swing in special session at revising the state's dozen-year-old cap on property taxes, which has led to gross disparities (2nd item) in rates between different groups of homeowners. Most states impose some type of cap on property tax rates. Perhaps surprisingly, some of the older ones are still holding up better than Florida's.
Consider Proposition 13, California's celebrated ballot initiative from 1978. In addition to capping rates, the law changed the way the state assessed property, moving away from market values and toward an acquisition-based system -- meaning rates can only spike up rapidly when a home changes hands.
Although the high cost associated with selling a house and changing its assessment rate drew complaints in Florida, this seems to be less of an issue in California, perhaps because residents there are less mobile and know they'll save money if they hold onto their property. "People know they will get their turn if they stay somewhere for a long time," says Steven Sheffrin, a UC Davis economist.
The biggest changes wrought by Proposition 13 have to do with the way it fundamentally altered the fiscal relationship between the state and localities -- making funding of education primarily a state responsibility, for example. But putting aside the complicated matter of how the different levels of government interact, Proposition 13 clearly succeeded in its primary goal -- lowering property taxes from above 2 percent to today's nominal rate of 1 percent. "Did it keep the peace in regards to property tax, and did it make the property tax less popular?" Sheffrin asks. "The answer is yes."
Proposition 2 1/2, passed by Massachusetts voters in 1980, took a different tack from Proposition 13. Its prime concern was limiting the total amount of collections within a locality, not worrying about house-by-house rates. "The total levy you can bring in can rise 2.5 percent a year," says Joan Youngman, of the Lincoln Institute of Land Policy. Then you go and distribute that across the taxable property in your community, according to market value."
There are now some complaints, which came up during last year's gubernatorial campaign, because residential property values are growing at a rate far exceeding that of commercial property, making homeowners feel that they're paying a greater share of the total tax load.
But Governor Deval Patrick has yet to formulate a policy addressing the issue. On the whole, despite the stresses, the Massachusetts law seems to have served the commonwealth pretty well.
"It really put a strong check on property taxes, because it lowered the total amount to be raised," Youngman says. "It's a very useful contrast to the approach of California or Florida, where you end up with huge disparities in properties with equal market values."