Florida Can Reform Property Taxes To Incentivize Young Families

Property taxes on primary residences in Florida may be eliminated after Gov. Ron DeSantis made headlines last week by calling for their abolition. DeSantis has indicated he is in favor of completely ending the taxes on private residences and wants the “boldest amendment” possible on his desk to sign. The Florida governor is right to want homeownership to be less burdensome, but legislators must consider carefully what would most benefit their state and constituents, especially young families struggling to enter the market.

Property taxes have been in place since before America’s founding, and from the early days of the colonies until now, have served as the primary means of funding local government services. Over the centuries, the definitions of taxable property were narrowed to exclude things like household goods, tools, and livestock, so today most Americans pay property taxes only for their homes and perhaps vehicles. When the United States was an agrarian society, taxation of property was practical. For the average American family, land owned was their livelihood and source of income, making property taxes largely proportional to one’s wealth. Because the country has industrialized and most Americans no longer work the land like their forefathers, it is logical that the tax system be revised to reflect the modern taxpayer’s relationship with property.

The concept of paying taxes to keep something one owns is broadly unpopular and strikes many Americans as fundamentally wrong. DeSantis’ proposal would likely be supported by Floridians and bring greater security to homeownership, especially to retirees or other fixed-income households who may struggle to pay rising property taxes. These taxes also raise the costs of living and disincentivize Americans from upgrading their homes, so the elimination of the barrier and freeing of funds may inspire some economic growth. At a time when housing costs are soaring, it is conceivable that reducing property taxes would make living more affordable for many Americans.

Nobody likes paying taxes, but they are a certainty of life. Eliminating property taxes may have unintended consequences for local governments that are funded largely by such revenue streams. The most obvious objection is that cities and counties may be unable to fully fund schools and other public works, which would require more state funding and, therefore, more state taxes and state control. Bigger centralized governments at the expense of local responsibility would be an unfortunate side effect of ending one of the biggest sources of funding for many communities.

High property taxes normally serve as a motivation to sell, but in Florida, property assessments for a primary residence cannot rise more than 3 percent per year and resetting only when the property changes ownership, which incentivizes homeowners to stay put. Across the U.S., almost three in ten large homes (three or more bedrooms)  are owned by baby boomer empty nesters. High property taxes create natural mobility as these older homeowners are encouraged to downsize and free up real estate for younger, growing families.

Without opportunities to buy, young families find themselves living in homes too small for their needs or unable to enter the market altogether due to lack of supply; meanwhile, older homeowners feel trapped in homes they no longer want.

The calls for relief may be loudest among our nation’s older residents, but distorted incentives already favor older generations more than the younger, particularly in the state of Florida. Fifteen states, including Florida, already offer property tax exemptions for senior citizens, and another seventeen states provide tax credits to older homeowners. While the majority of older Americans enjoy some form of property tax relief, there is not one state in the union that offers property tax breaks to young people.

Reforms like these functionally subsidize those who have had their entire lives to accumulate wealth at the expense of those trying to build it. Ending property taxes would primarily benefit older Americans, of whom 80 percent are homeowners, who already enjoy caps and exemptions, while doing little to help younger families enter the market (only 26 percent of adults from Gen Z are homeowners, along with 55 percent of millennials). States need not punish seniors, but tax policies must be structured in such a way so as not to freeze younger generations out of the market.

If American legislators want to ease the burden of taxation on young workers without starving local governments for funds, tax reform should be carefully targeted with the goal of promoting growth and improving affordability for the young workers of the state. Allowing a first-time homebuyer to pay no property tax for the first five years after purchase would remove a barrier to entry for the next generation. A child tax credit of perhaps 20 percent per child would also improve affordability for young families, incentivizing both homeownership and fertility — a boon considering Florida’s stagnant fertility rate — as current property tax rates may sometimes preclude larger families from procuring larger homes. Even a modest per-child reduction in property taxes would be a recognition of the financial reality of raising future citizens.

Implementing a partial land-value model would reorient taxes to be more pro-growth and less likely to fluctuate. Current tax codes often call for major increases in property tax after development, construction, and home improvements cause the assessed value to go up. By basing tax assessments primarily on the value of the land rather than the structures built upon it, property taxes would be more predictable from year to year, and consumers would be less discouraged from making valuable improvements to their homes. Adopting this model would place taxes on the inherent value of the land rather than a homeowner’s investment in the property, thus rewarding productive use of one’s property.

However the legislators of Florida chose to proceed, they should consider what will stimulate population growth and economic activity without a great cost to schools and public infrastructure. They should also remember that the young workers carry a disproportionate share of the tax burden while already struggling to enter a housing market distorted by decades old government policies.

Gov. DeSantis wants to modernize the tax system; hopefully, Florida will land upon a method that will work as a model for other states to follow. That modernization should undo the policies that trap retirees in their homes and keep young families out of the market, and rather empower young families to build generational wealth and allow older Americans more freedom to move or downsize.

Shadrach Stark is a Christian father and husband who writes on matters of faith and public policy.