Editor's note — This article is part of Power Play, a series of special reports examining the push to reduce or eliminate property taxes in Florida.
Florida’s state and local tax structure makes Florida an excellent place to be an affluent retiree or a wealthy investor, but not so great for working families or young couples starting out.
The Sunshine State has the most “regressive” tax structure of all 50 states, according to a recent study by a national tax analysis organization. That means the wealthy pay a lower percentage of their income in taxes while the poor and middle class pay more.
Proposals now being considered by Gov. Ron DeSantis and the state Legislature to sharply cut or eliminate property taxes on homesteads – owner-occupied homes — would likely make the tax structure even more regressive, according to tax experts.
That’s partly for the simple reason that property owners tend to have more money than non-property owners.
While most states have regressive tax structures, Florida is the most regressive, according to the study from the Institute on Taxation and Economic Policy (ITEP), a non-profit based in Washington, D.C.
Low income Florida families pay almost five times as large a percentage of their income as the wealthy in state and local taxes, the study says.
The lowest fifth of Floridians by family income pay 13.2 percent in taxes while the wealthiest 1 percent – those with incomes over $735,000 — pay just 2.7 percent, according to ITEP’s calculations.
As a whole the top 20 percent of income earners – those with incomes over $118,000 – pay 4.5 percent.
The main reasons are the state’s lack of an income tax and its heavy reliance on sales taxes, the ITEP figures show.
Sales taxes hit lower income families harder because they usually spend a greater proportion of their income on consumption than the wealthy.
And Florida depends heavily on sales and excise taxes, such as those on motor fuel, alcoholic beverages and tobacco. Unlike some states, Florida exempts groceries and medicines from sales taxes.
The Florida Policy Institute, a non-partisan policy analysis organization, has calculated that those taxes account for about 80 percent of Florida’s government revenue.
Both organizations are non-profit, non-partisan advocacy groups.
The Florida Policy Institute says its goal is to enhance economic mobility and quality of life; ITEP and its sister organization, Citizens for Tax Justice, are considered left of center and advocate for increased taxes on the wealthy.
In addition, a recent study by Realtor.com said eliminating property taxes on homesteads “would disproportionately benefit wealthy Floridians at the expense of those who don’t own homes.”
The study said the move could increase real estate prices in the state by 7-9 percent.
“It would be a boon to existing property owners,” says Realtor.com senior economist Joel Berner, who conducted the analysis. “But this measure would disproportionately benefit wealthy Floridians at the expense of those who don’t own homes, and would make it even harder to break into homeownership because of the increased prices.”
Kurt Wenner, senior researcher for Florida TaxWatch, a non-profit that advocates fiscal restraint and lower taxes, said it’s “not news” that Florida has a regressive tax system.
“Most state tax systems are,” he said. “Florida’s is more so because of this reliance on sales taxes instead of income taxes. Income taxes are usually fairly progressive.”
The Florida Constitution includes a prohibition on personal income tax and inheritance taxes, adopted in 1968.
“The lack of an income tax is also a major reason the state is so attractive to retirees,” according to the James Madison Institute in Tallahassee, and even suggesting repealing the constitutional prohibition has been a political third rail. There’s been no serious move to impose an income tax in recent years, possibly since the prohibition was enacted.
If eliminating taxes on homestead taxes led to greater dependence on sales taxes and other revenue sources, it would likely force the state and local tax burden even more heavily onto lower-income people, said both Wenner and Neva Butkus, a senior analyst related to state policy at ITEP.
If homestead taxes are eliminated, “You’re going to have to come up with revenue somewhere,” Wenner said.
In its study, ITEP sought to include the effect of property taxes on rents, and the effect of corporate income taxes on the tax burden for all income groups, said Butkus.
It calculated that individuals in the bottom-20 percent income range pay 5.7 percent of their incomes for general sales and excise taxes.
That figure gradually decreases as income levels rise, down to 1.3 percent of income for the top 5 percent of earners, and 0.3 percent of income for the top 1 percent of earners.
Sales taxes are “deeply regressive,” said Butkus.
Homestead taxes usually are less regressive, Wenner said.
“There’s a general correlation between home value and income” – people with more expensive homes tend to have more income.
Bob Henriquez serves as Hillsborough County Property Appraiser.
Hillsborough County Property Appraiser Bob Henriquez said property tax “probably creates the least inequity compared to other taxes. It’s based on your asset value and your asset value should be related to your ability to pay your share.”
However, the state’s Save Our Homes provision for exemptions from homestead taxes “goes in the other direction,” said Wenner.
It limits how much the taxable value of a homestead can go up to no more than 3 percent a year, regardless of how much the appraised value increases, and therefore limits the amount of tax levied.
That means the value of the tax break provided increases year by year, and long-term homeowners pay much less than newcomers and first-time homebuyers on comparable properties, as the Florida Trident previously reported.
The Save Our Homes tax break doesn’t apply to rental homes, so renters feel the burden in higher rents.
Asked what kind of property tax break would lessen the tax burden on lower-income people, Butkus suggested a “circuit breaker” approach adopted in several states – a tax break linked to income levels rather than length of ownership.
“That approach does what many legislators say they want to do, which is lower the burden for working families,” she said.
About the author: William March has written about politics in the Tampa Bay area for the past 40 years. He has worked for newspapers in his native North Carolina and for the Tampa Tribune, the Tampa Bay Times and the Associated Press in Florida. The Florida Trident is an investigative news outlet focusing on government accountability and transparency across Florida. The Trident was created and first published in 2022 by the Florida Center for Government Accountability, a non-profit organization that facilitates local investigative reporting across the state.
