Across the country, taxpayers are growing more frustrated with high property tax bills, prompting state legislatures to pursue a variety of reforms. Florida has captured attention lately as that state’s legislature has sent a proposal to voters which would eliminate a substantial amount of residential property taxes.
Although Iowa enacted sweeping property tax reforms this year, taxpayers still have much to gain by studying what other states get right and what they get wrong. Experience is the best teacher, but learning from someone else’s experience is a cheaper lesson.
In November, the constitutional amendment Florida voters will consider would fundamentally change the state’s property tax system. The “Save our Homes from Excessive Property Taxes” amendment, would significantly increase the homestead exemption “beginning with a $150,000 homestead exemption in 2027, and increasing it to $250,000 in 2028, with these amounts indexed for inflation beginning in 2029.”
For many Florida homeowners, the amendment would represent substantial tax relief. Qualifying homeowners whose homes are valued at $250,000 or less would eliminate most of their non-school property tax liability, and homeowners with higher-valued homes would also receive a substantial reduction in their property taxes.
Importantly, even homeowners whose homes are valued at $250,000 or less would continue paying school district property taxes. The amendment applies to most local levies but exempts school district taxes, which typically account for 40 to 50 percent of the average Florida property tax bill, much like in Iowa. That exemption reflects one of the most significant changes made by the Legislature. Governor Ron DeSantis originally proposed a more expansive plan that would have applied the homestead exemption to school district levies as well. The differences between the governor’s proposal and the amendment voters will ultimately consider highlight both the political and practical challenges of substantially reducing, or even eliminating, property taxes.
The amendment would also restrict local governments to spending property tax revenue on core governmental functions, including public safety, education, infrastructure, natural resources, debt and employee obligations, and certain government operations.
Proponents argue that the amendment would provide meaningful property tax relief and continue to build on Florida’s already strong economic position. They contend that allowing homeowners and businesses to keep more of their assets would encourage additional investment, attract even more residents and employers, and further strengthen the state’s economy.
Local governments in Florida, much like those in Iowa, rely heavily on property taxes. Property taxes account for 74 percent of local government revenue, making them a critical source of funding. It is estimated that local government revenue would be reduced by $4.6 billion in the first year and $8.4 billion in the second year if the amendment passes. Because the proposal does not identify replacement revenue or promise additional state funding, local governments would have to decide how to respond.
One option is to reduce or reprioritize spending. Florida communities are already discussing delaying capital projects, reducing some services, closing underused facilities, and sharing equipment and personnel with neighboring governments. Some view these changes as overdue efficiencies, while others worry they could significantly reshape local government.
If spending reductions prove insufficient, governments may also look for new revenue sources. The amendment would provide relief to many homeowners, but it would not prevent governments from shifting more of the property tax burden to commercial properties, or other homes that don’t qualify for the exemption.
Because Florida has no state income tax, lawmakers would likely look to higher sales taxes if they chose to replace lost local revenue. Estimates suggest fully replacing the lost property tax revenue could require a combined state and local sales tax exceeding 15 percent, with rates varying among communities based on “differences in population density, property valuations, and economic activity across the state.”
Local governments could also increase fees or other taxes, such as fuel taxes, to generate additional revenue. As a result, some property tax savings could be offset by higher costs elsewhere. This wouldn’t be unique to Florida, as Iowa communities have frequently been turning to sources like franchise fees to fill their coffers.
The “Save Our Homes from Excessive Property Taxes” amendment is attracting national attention, but two important points should be kept in mind. First, every state is different, so a policy that works in Florida may not work in Iowa. Second, whether it is Florida’s proposed amendment or Texas Governor Greg Abbott’s effort to impose spending limits on local governments, both approaches begin with the same premise: government spending ultimately drives property taxes. Florida seeks to address that challenge by limiting the amount of property tax revenue local governments can collect.
If approved, Florida’s amendment would almost certainly reduce the property tax burden for many homeowners. The more difficult question is how state and local governments will respond. They may choose to reduce spending, rely more heavily on other taxes or fees, or adopt some combination of those approaches. As with most major public policy changes, the amendment is not simply a choice between one outcome and another, but between different sets of tradeoffs. Understanding those tradeoffs will help Floridians better evaluate the amendment and its long-term effects.
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