Florida’s Property Tax Reform Push: Weighing the Options Amidst a Lack of Consensus on the State Budget

Florida’s latest property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. debate highlights the familiar challenge of prioritizing pro-growth tax policy while tackling rising property tax burdens. Florida has a variety of property taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. relief provisions, including the Save Our Homes Constitutional Amendment, an assessment limit, and millage rate caps. As housing values have skyrocketed in recent years, this has particularly driven up tax burdens for newly purchased homes, which do not have the advantage of years of reduced assessment growth. This can create high burdens for some homeowners even though Florida’s average property tax burdens are low compared to the rest of the country. Homeowners enjoyed an effective rate of 0.74 percent of owner-occupied housing value paid in property taxes in fiscal year 2023, according to recent Census data.

Governor Ron DeSantis (R) recently convened a roundtable focused on property tax relief where he outlined his own tax policy priorities. His recommendations diverged sharply from the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. reductions under consideration in the Florida House, so DeSantis extended the legislative session until June 6 to resolve these and other differences.

House Plan

The House tax reform plan was revealed on the last day of session in a 37-member committee. This committee was tasked with finding consensus on a tax relief package, following legislators’ failure to come to an agreement on the state’s annual budget.

HB 7033 proposed $4.9 billion in total tax cuts, largely driven by a 0.75 percentage point reduction in the general sales tax rate—from 6 percent to 5.25 percent. This reduction alone carried a fiscal impact of $4.36 billion. Additional tax reform proposals included targeted tax reductions on other elements of the Florida state economy, which are taxed at lower rates. The House prioritized sales tax rate reduction, tackling the state’s largest source of tax revenue, while Governor DeSantis focused on local property tax relief, leading to something of a standoff.

Governor DeSantis’s Property Tax Reform Priorities

Governor DeSantis has proposed a two-pronged approach to long-term property tax relief. The first step is comprised of a $1,000 statewide homestead property tax rebate that would go into effect during tax years 2025 and 2026. This rebate would be the same regardless of the value of a home or its local tax rate. It is effectively a transfer of state tax revenue to homeowners, regardless of circumstance, housing value, or tax liability, and because it is not permanent, it does nothing to change the long-term tax cost of home ownership.

Florida has approximately 5.1 million homestead properties as of 2024. Assuming perfect compliance with this proposal, a $1,000 rebate per homestead could amount to around $5.1 billion in relief, comparable in scale to the House’s $4.9 billion HB 7033 proposal.

The second step under the governor’s plan is to double or triple the current $25,000 homestead property tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service (IRS), preventing them from having to pay income tax. for all full-time Florida residents.

Florida currently has a two-tiered property tax exemption that exempts the first $25,000 from the entire assessed value of the property and applies to all levels of government, including school districts, counties, municipalities, and special taxing districts. The second tier applies to the assessed value between $50,000 and $75,000 but excludes school district taxes. This means local taxes (like county and city levies) can be reduced by the tax levied on up to another $25,000 in assessed value, but school taxes will still be calculated on that portion of the assessed value.

The first $25,000 exemption tier costs all local governments about $2.08 billion annually. Doubling it would cost an estimated additional $1.97 billion, and tripling it would add about the same amount again. If, however, the governor’s proposal allowed school districts to continue to tax the newly exempted amount, each additional $25,000 increment would cost about $1.23 billion. It’s also important to note that tripling either the first or second exemption would functionally create up to a $100,000 exemption on most residential properties.

Another major consideration is the variation in assessed real property across Florida’s 67 counties. Florida adopted an assessment limit known as the Save Our Homes Amendment, which limited assessment growth to the lesser of 3 percent or the annual rate of inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. . This leads many homes to have taxable assessed values well below their market values, meaning that a $100,000 homestead exemption can substantially reduce or even eliminate tax liability on some homes.

A 2018 report from Florida Tax Watch considered the impact of disparate housing values for each county on the overall effectiveness of increasing the homestead property tax exemption for housing values between $100,000 and $125,000. They found that only 43 percent of all households would benefit from the increased property tax exemption. The average exemption was worth just over $21,000, while the average savings on a per-capita basis was a mere $255. Therefore, it is doubtful that all households would continue to benefit from the doubled or tripled homestead property tax exemption, even after controlling for the greater number of households that would qualify for such exemptions.

A major challenge is that property taxes primarily fund local governments and schools, so reducing or eliminating them shifts the burden to the state. Governor DeSantis acknowledged this risk, suggesting the state could backfill local revenue losses with sales tax revenue. However, that would require $2-4 billion in annual transfers from the state to local governments—a fiscal commitment with uncertain long-term sustainability. The backfill would also reward counties with higher property taxes, since they would get more backfill for the exempted assessed value. For instance, millage rates in Miami-Dade County run as high as 24 mills, while smaller rural counties have mill levies that range from 5 to 8 mills. (Mills are a standard unit of measurement when discussing property taxes; one mill is one-tenth of one cent, or $1 in tax for every $1,000 of a property’s assessed value.)

The Middle Ground

Thankfully, there is a middle ground between doing nothing and pursuing outright property tax abolition. One practical option is adopting a strict levy limit, capping how much overall property tax collections can grow year-over-year.

Several states, including Louisiana and North Dakota, already implement levy limits tied to prior-year collections. These limits prevent automatic, unlegislated tax increases when property values rise sharply. Importantly, Florida already has robust millage rate caps at state, county, and municipal levels, positioning it well to adopt levy limits without compromising revenue stability.

While voters’ frustration with rising property tax bills is real and warranted, it’s important to remember that property taxes are economically efficient, transparent, and locally accountable. Shifting billions in existing tax revenue to localities from the state government through a temporary rebate or permanent exemptions is economically unsound.

That is why the Florida legislature’s emphasis on sales tax rate cuts, as seen in HB 7033, has merit. Dollar for dollar, reducing sales tax rates provides better pro-growth tax relief for Florida. But there’s room for targeted property tax reforms, like a levy limit combined with the state’s already strict millage rate caps, that address rising tax burdens without destabilizing local budgets.

Governor DeSantis has tapped into genuine public concern over rising property taxes. Rather than offsetting a relatively efficient tax with less efficient alternatives, Florida policymakers should focus on constraining property tax growth, improving transparency, and ensuring local accountability, all without jeopardizing essential public goods and services.

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