Governor Scott and the Meaning of the Phrase “Tax Increase”

Governor Scott and the Meaning of the Phrase “Tax Increase”

I think most people who know me would say that, on balance, I’m a pretty nice guy. I work hard to maintain that image. 😉

But every now and then, the mask slips. My eyes sparkle with devilish delight, and my smile becomes something more of a smirk.

It’s an occupational hazard of being a columnist and blogger.

So I’ll confess that it happened over lunch on Thursday. Guilty as charged.

The cause of my wicked mirth was the exchange between Senator Gaetz and Governor Scott over whether the governor’s proposal to maintain the current state-mandated education property tax rate constitutes a tax increase.

For those unfamiliar with the strange notions of “truth” about property tax in Florida, you can be forgiven if you are confused. How can maintaining a tax rate be considered a tax increase?

Every local official in Florida is familiar with the political pain engendered by this kind of definitional dispute.  Way back in 1980, the Florida Legislature forced us into this conundrum with the adoption of the Truth in Millage Act.

In case, dear reader, you are not familiar with this act, its effect can be described this way: If the aggregate assessed value of the properties in a particular community increase overall, so that a given millage rate will produce more revenue in the coming year than in the present year, that officially must be described as a tax increase, even though the tax rate has not increased.

This is true even if the local government reduces the millage rate, unless it reduces it enough that the amount of revenue generated is the same for the coming year as it was in the previous year. That’s right: by law, we are increasing taxes even though we are decreasing the tax rate.

This isn’t true of any other tax we pay, so far as I know.

If I make more money this year than last, I probably will pay more federal income tax. I’m better off, so I pay more. Not a larger share of my income (unless I’ve crossed into a new tax bracket). I’m paying the same tax rate, but because I have more income, I pay more taxes.

We don’t call that a tax increase.

If I buy more “stuff” because my income has improved, I pay more sales tax. The amount of sales tax I pay is based on how much stuff (that is taxable) I buy. The more stuff, the more tax. Not because the sales tax ratehas changed, but because my purchasing activity has increased.  Buy more stuff, pay more tax.

We don’t call that a tax increase.

The reason property tax gets treated differently, in my opinion, is because an increase in the value of a property we own does not mean we have more disposable income. A home, strip mall, office building, or pasture is not a liquid asset. If my property investment is particularly astute (or lucky), I may see a very dramatic increase in the value of that asset, but it is a “profit” I will realize only if and when I sell the property.

So I get it. There is a legitimate concern about what happens to people when their asset is their home, their home increases in value, but their income does not increase. Since property value and income are totally distinct elements of our financial picture (unless we are talking about rental properties), the mismatch, especially in a state with such dynamic property values, can be huge and harmful.

This is one of those genies it’s probably hard if not impossible to get back in the bottle. Can’t you just see the attack ads against any legislator who votes to repeal “truth”?

So we’re left with having to explain, over and over again, what we are doing, so that what actually is the truth becomes clear to our citizens. And we are left, year after year, to take yet another hit for increasing taxes when, in truth, we haven’t (meanwhile, I don’t hear any major outcry against the Legislature for the sales tax increase we’ve experienced as the economy has recovered and we’ve bought more “stuff.” Of course not; they haven’t increased the sales tax rate).

So it’s at least somewhat gratifying to have state officials arguing with each other about whether the definition of “truth in millage” that their predecessors imposed on us really is the truth.

Misery really does love company.