Getting rid of property taxes in Florida would come with big consequences and challenges for the state, which would need to find about $43 billion elsewhere to make up for that loss of revenue funding critical public services, according to a new Florida Policy Institute report. (Link not live til embargo lifts)
Property taxes make up between 50 to 60% of school district revenue in the Sunshine State, per FPI. And property taxes make up about 18% of county revenue and 17% of municipal revenue, helping local communities address some of their most critical needs, including fire and police services.
“Property taxes are the cornerstone of local fiscal autonomy in our state,” said FPI Policy Analyst Esteban Leonardo Santis, author of the report out Monday. “Eliminating property taxes would strip local governments of their fiscal independence.”
A recently-proposed Senate Bill would direct Florida to study the potential impacts of replacing property tax revenue with budget cuts and sales taxes, including some local sales taxes. Governor Ron DeSantis also recently floated the idea in a social media post and said property tax is an “oppressive and ineffective form of taxation.”
Over time, property taxes have proven to be “remarkably resilient,” per FPI: much more stable than a consumption, or sales, tax. Those sales taxes tend to be more volatile, subject to change based on the current economic outlook.
“If we have an economic downturn, the sales tax is not as stable as property taxes, which means that we could see drastic cuts or changes in public services, depending on how the economy is going,” Santis said.
Already Florida has the most regressive tax code in the country, Santis said, citing the latest edition of the Institute of Taxation and Economic Policy’s “Who Pays?” report. Expanding the state’s reliance on sales tax would exacerbate existing inequities for lower-to-moderate income families, who already spend more of what they have on sales tax, compared to wealthier households, Santis said.
To make up for the drop in property tax revenue, Florida would need to up its current general sales tax rate by at least double, to 12%, and likely to even higher than that, per FPI. Even at 12%, Florida would have the highest sales tax rate in the country.
