Editing The Constitution: Amendment 3

July 12, 2010

Note: Every 2 years, Florida voters get a chance to literally edit the state constitution, as proposed changes to the actual text of the document are placed on the ballot. This post is part of a continuing series.

Florida’s 2010 Amendment 3 can be seen as a legacy of sorts of former Florida House Speaker Marco Rubio. The amendment, backed by Charlie Crist, Florida Realtors, and the Florida Chamber of Commerce, could wreak havoc with municipal budgets as it seeks to slash property tax revenue by $1 billion over three years.

As proposed, Amendment 3 offers first-time buyers more equal footing with homeowners, says David Hart, vice president of legislative and governmental Affairs for the Florida Home Builders Association. The proposal calls for a first-year tax break averaging about $500 for a $200,000 home. Benefits would be phased out over five years, with the special exemption ending in year six. Total benefits on that same $200,000 home would be about $1,500.

“We support it because in the case of the additional property tax benefit to first-time buyers, it helps level the playing field with longtime homestead property owners who’ve enjoyed the benefits of Save Our Homes,” Hart said. While the organization has not taken an official vote on the measure, Hart said the group thinks it will motivate buyers and spur housing starts and construction jobs….

Critics of Amendment 3 fear local governments and school districts would suffer the brunt of further property tax breaks under the proposal. If approved, the amendment will cost those local entities about $1 billion in lost revenue over three years, state economists estimate. The amendment is “of great concern to us because we’ve seen funding for schools go down over the last couple of years,” said Mark Pudlow of the Florida Education Association.

Even more alarming is the state’s shift from state funds to local property taxes to pay for schools and at the same time cut property tax revenue, Pudlow added. While schools would lose money from the additional homestead exemption in the proposed amendment, cities, counties and special tax districts would lose property tax revenue from both the new exemption and the 5 percent assessment cap on non-homestead properties.

Marco Rubio got where he is today by jumping on the property tax reform bandwagon back in 2007. That year, as incoming Speaker of the Florida House, Rubio gained national attention as he championed a complex tax swap package that would have increased the regressive state sales tax dramatically while completely eliminating taxes on homesteaded properties.

“I loved him. I absolutely loved him,” recalled Margie Patchett, leader of a local antitax group. “I thought, ‘This is not your standard politician. This is a man of vision.’ ”

The scene played across Florida — from Panama City to Spring Hill and Sarasota. Marco Rubio shaped anger over soaring property taxes into the defining mark of his two years as speaker.

Today, the issue has been overlooked as Rubio stands atop the race for U.S. Senate. But that period was the foundation of his success…

Some of the first calls Rubio made after declaring his candidacy for Senate were to contacts he made in 2007. Partly with their help, he won a series of straw polls that represented the beginning of the end of Crist’s run as a Republican.

And while most House speakers don’t get much attention beyond Tallahassee, Rubio enjoyed widespread exposure because of property taxes. National TV networks visited him in Miami and conservative leaders in Washington talked him up.

“He’s the most pro-taxpayer legislative leader in the country,” Grover Norquist said at the time…

Rubio’s record on property taxes invites questions about his effectiveness. His ideas were big but mostly failed, even though his party controlled the Legislature. In the end, Crist prevailed with a simpler (and less substantial) property tax relief plan…

The day after the Tallahassee rally, the House passed Rubio’s tax swap on a mostly party-line vote. That was as far as it would go.

Senate Republicans mocked the plan as a massive tax increase, even though it would have cut a corresponding level of property tax. Some of the richest Florida homeowners would have gotten huge breaks while critics said the poor would be disproportionately hurt by a higher sales tax.

His party controlled both chambers and the Governor’s mansion, but Rubio’s proposal was rejected in the end in favor of Governor Charlie Crist’s plan which was placed on the ballot as Amendment 1 in 2008.

Amendment 1 was passed by the voters in 2008 and in 2009 the now Rubio-less Legislature, again prodded by Crist, jumped back onto the still circling tax reform bandwagon and placed this year’s Amendment 3 on the ballot.

But let’s back up a bit and take a look at Florida’s tax system.

Florida has no state income tax. We rely exclusively on revenue from sales and use taxes and property taxes to fund state and local government.

Since the early 1930′s, Florida has had a homestead exemption which essentially declares a certain amount of the value of one’s primary home exempt from taxation as long as the homeowner is a permanent resident of the state.

In 1992, voters modified the homestead exemption with the Save Our Homes amendment which capped annual rises in property appraisal values (done for taxation) for homesteaded properties at 3 percent. This was sold as a way to help elderly residents facing increasing tax bills to stay in their homes.

The next major change was Crist’s 2008 Amendment 1 which doubled the homestead exemption to $50,000 and also managed to make this homeowner only tax break even more regressive by ensuring that low valued homes would not be entirely exempt – the second half of the $50,000 exemption only applies to the value of a home between $50,000 and $75,000 – meaning that your home must be worth at least $75,000 to qualify for full exemtion. (YES – there are plenty of homes – right in my county! – worth less than $75,000 right now.)

Amendment 1 passed with high expectations amongst voters that their property taxes would be slashed for free. After all, this is how the Republican politicians had sold the measure to the people.

In actuality, homeowners enjoyed modest savings while Amendment 1 combined with falling property values to decimate municipal budgets which rely almost exclusively on property taxes for funding.

So in 2009, as cities and counties throughout the state were facing layoffs and hard budget choices, firing teachers, closing schools and libraries, cutting back on police and fire protection, the GOP Legislature and Republican Governor Crist did exactly what everyone expected them to do by placing yet another property tax relief measure on the ballot.

Amendment 3 would give a homestead exemption to first time buyers, eliminating the current waiting period. The measure would also halve the 10 percent yearly cap on appraisal values for all non-homesteaded properties, including businesses and rental properties.

Needless to say, the resulting loss of revenue (estimated at $1 billion over three years) will further cripple already weakened local budgets. If Amendment 3 passes, look forward to more municipal layoffs and cutbacks in services.

Florida constitutional amendments require a 60 percent super majority to pass, so there is a high threshold right off the bat, but Amendment 3 has some powerful backers, including the Florida Realtors, who are happy for any potential lifeline for the foundering real estate market.

Republican conservative anti-tax Governor Charlie Crist fought hard to get this measure through the Legislature in the closing days of the 2009 session. Since that time, however, we haven’t heard a whole lot about Amendment 3.

Will independent left-leaning Senatorial candidate Charlie Crist continue to fight for this tax cut that many unions and other progressive organizations oppose? Do the Florida Realtors and Florida Chamber actually care enough at this point to wage a campaign in favor of this measure?

Interestingly, Florida Tax Watch, a group that often fights in favor of tax cuts, has recently withdrawn its tepid support for Amendment 3, and, in fact, for property assessment caps altogether, which could give folks like Crist plenty of cover to flip on the issue.

Now, a new constitutional amendment, Amendment 3, will appear on the ballot in November and if approved, reduce that 10 percent limitation to 5 percent, potentially crippling Florida’s economic future, the TaxWatch report says. It compares that scenario to being similar to the way that Proposition 13 has contributed to the near bankrupting of California.

In the end, TaxWatch said the more stringent assessment limitations outlined in Amendment 3 would:

• Lower tax revenues for local government

• Lower municipal bond credit ratings

• Impede local governments that are hamstrung in adapting to economic conditions

• Create greater reliance on other types of taxes and an unnecessarily complicated system for taxpayers

• Reduce real estate transaction activity

• Reduce jobs and compensation for transaction facilitators

• Become an impediment to a vibrant economy

With luck, Amendment 3 will fail to garner 60 percent of the vote and will thus be disappeared, but with a title that will be the most prominent feature on its ballot line yelling “PROPERTY TAX LIMIT…,” many voters may have a very hard time suppressing the anti-tax impulses which have been ingrained through years of conditioning and will vote for Amendment 3 without ever making a conscious decision to do so.

I think it’s likely that Rubio will come out strong for Amendment 3 – he has no choice. Crist will flip flop, siding with Florida Tax Watch, and no one, not even the hard core Dems on Daily Kos, will care what Kendrick Meek thinks, because we really don’t need a real Dem on the ballot come November as long as we have Charlie Crist to fawn over.

Stay tuned.

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