"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens....Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." ~ John Maynard Keynes
Numbers Don't Lie, Politicians Do
June 6, 2007
Unlike the long anticipated sequel to Waterworld , there is going to be a 'special session' of the Florida legislature this month, where the upstanding senators and representatives of the great state of Florida promise that they are going to 'solve' the current property tax crisis.
These fine 'servants of the people' originally headed off to Tallahassee and the regular session of the legislature earlier this year promising to agree on a property tax reduction, but unfortunately time ran out before they could come to an agreement on just how much of our own money they would let us serfs keep. But 'fortunately' there was enough time to introduce, vote on and approve a $595 million property tax increase (for educating our young ones), amongst other extremely 'important' items: for example 'officially' recognizing the Battle of Puebla on Cinco de Mayo, and designating March 21, 2007, as "Space Day" in Florida (where Floridians can go live if they want to avoid property taxes, for now at least).
The Speaker of the House, Marco Rubio, has thrown upon himself the mantle of 'Tax Cutter Extraordinaire,' creating grand expectations amongst the throngs of financially strapped taxpayers. But unfortunately Mr. Rubio seems more interested in sports than budget cuts, since he introduced a bill that allotted $800,000 to the South Florida Sports League for a synthetic football field. (Coincidentally, Mr. Rubio once served on the Board of Directors of the league and currently plays football there.) Mr. Rubio's alma mater, the University of Miami , was apparently also on his mind since it received a generous $80 million for genetics research (perhaps in the hopes of spawning future generations of less cantankerous taxpayers). Ultimately, the synthetic field of dreams was crushed by the governor's veto, but the genes at UM are anxiously awaiting their fertile funds.
Speaking of Governor Crist, his 'record' $459 million in vetoes from the state's $71.5 billion budget were hailed as a great and unimaginable feat of niggardliness. Even Dominic Calabro, president of TaxWatch, said "This governor has indeed set the bar to a new high for sound fiscal stewardship." But a closer look at the numbers reveals that the bar set by TaxWatch is actually quite low. In 2001, the budget for the state of Florida was $47 billion; if you adjust that for inflation and population growth, the 2007 budget should have been $59 billion. It is probably extremely safe to assume that the 2001 budget contained its 'fair share' of unnecessary profligate spending and that people weren't dying in the streets that year due to a lack of state funds. Considering those facts, Mr. Crist could have easily axed over $12 billion from the budget, as opposed to just butter-knifing a mere $459 million.
Across Florida , county and city governments are predicting certain apocalyptic doom if any significant revenue cuts are made from their budgets. In Miami-Dade (where this author hails from) during a recent public hearing, Commissioner Katy Sorensen moaned to county lobbyist Ron Book that the county would have to make serious cuts in services if its budget was reduced by more than $150 million. The 2007 Miami-Dade County Budget totaled nearly $7 billion, an increase of nearly $700 million (14%) over the previous year's budget. The most astonishing fact about the budget increase is that it took place during a year that an orgy of theft and malfeasance, totaling well into the millions of dollars within several county departments, was uncovered and exposed in the local press. A historical look at the county's budget should be enough to send Miami-Dade taxpayers into the streets with torches and pitchforks.
In 1993, the county's budget was $2.4 billion. By all accounts, people weren't clamoring in the streets for more county funds, burning in unattended fires, nor were they at the mercy of street gangs and neighborhood ruffians (though they were still at the mercy of the legislature). If we were to adjust the 1993 budget (again, we can safely assume it contained plenty of 'fluff') for inflation and population growth, it would mean that the 2007 budget should be $3.7 billion, not $7 billion. Adding insult to injury, an estimated $9 million in taxpayer dollars have been used by local governments to pay lobbyists in an attempt to influence the legislature to vote against any significant property tax reduction (your tax dollars working, against you?).
The county government isn't the only one with a mammoth budget in Miami-Dade; the local school board budget is just a hair under $6 billion. If you divide the budget by its approximately 350,000 students, you come to the conclusion that the school board spends an eye-popping $17,000 per student, per year. The school board also 'boasts' over 50,000 employees, which equals one employee for every seven students. You would think that with all this money and help that the Miami-Dade 'Public' School system would be a model of top notch education. Unfortunately for parents, public (i.e. government) schools in the county are a dismal failure when it comes both to academics and student safety; it's like making payments on a Rolls Royce but driving a Yugo.
So what plans to cut taxes do the legislators have? The most 'generous' (from a taxpayer perspective) is one recently introduced by Mr. Rubio (which will be ultimately reduced by 'compromise'). This plan would substitute the current homestead exemption of $25,000 with a 'super' exemption of $240,000 (80%) for the first $300,000 of the taxable value of a house, 70 percent for taxable amounts over $300,000 up to $1 million, and 30% of taxable value over $1 million. The plan on the surface sounds great, but upon closer examination, the results aren't quite so 'generous.' Homeowners would loose their 3% cap on annual increases on taxable values on homesteaded properties due to the Save Our Homes Amendment. Add to this equation that neither school board taxes nor (idiot) voter-approved taxes are affected, and any savings to taxpayers are negligible; taxpayers could potentially get stuck with a higher bill in the near future.
A taxpayer whose house today has a market value of $600,000 but due to Save Our Homes pays only on a basis of $175,000 ($200,000 tax assessment minus $25,000 homestead exemption) would be affected in following manner: His assessment would rise to $600,000. After the super exemption, his new basis would be $150,000 (not so bad). But remember the exemption wouldn't apply to the school board portion of his taxes (about 40% of the total tax bill), nor the Children's' Trust tax approved by the (intelligence quotient challenged) voters of Miami-Dade County (equaling $50 per $100,000 of taxable value). Add to that the possibility of the county raising its millage (tax) rate on property and some folks may end up worse than before the legislature 'solved' their problem.
Does the price of everything rise like the price of government? No, in fact, the prices of many things actually fall even before you factor for inflation. In 1987, an IBM computer cost $2,595 ($4,600 in 2006 dollars) for the most basic model. Today computers that perform many more tasks at much greater speeds cost a fraction of what they did in 1987. Why does the cost of government rise exponentially, while computers and other consumer items decrease in cost? Dell, Wal-Mart, Chevrolet, Kodak, etc. can't force you to buy a low quality product or service at an unreasonably high price. When was the last time the sales clerk at Wal-Mart held a gun to your head and made you pay $150 for a stained and incomplete towel set? The government can (and does). If you don't pay your property taxes, you lose your property.
So when the legislature convenes on June 12th for its 'Special Session,' Floridians shouldn't expect anything more than a dog and pony show, with gratuitous, self-serving press conferences by politicians in which we serfs will be told that great strides have been taken to alleviate our property tax burdens. If we (tax paying serfs) sit down and do the numbers, we'll notice that the 'savings,' if any, won't amount to much, just like the career politicians in the legislature.