State Taxation (Florida Bar Exam)

What could be more interesting than a discussion on taxation in the state of Florida? You don't need to answer that, but Florida Constitutional Law is a *heavily tested subject, and so if taking the Florida Bar Exam, it'll be important to know it well.

There are limits on the state's right to tax. The following taxes are all relevant for the exam:

Ad Valorem Taxes: These taxes are assessed based on the value of property. Only local governments (rather than the state itself) may levy these taxes either on real estate or on tangible personal property other than vehicles, boats, airplanes, or motor homes. The Florida Constitution places a 10 mill cap on ad valorem taxes. A mill is equal to one dollar for for 1000 dollars of property value, so that cap is 10 dollars for every 1000 dollars of property value. Note, though, that the tax can be imposed by schools, counties, and cities, so the combined cap is 30 dollars for every 1000 dollars of property value. 

There are some exemptions to ad valorem taxes. Property owned by federal, state, or county governments is immune for this type of taxation. Property leased by the government for government purposes is likewise immune. Also immune is property owned by a municipality and used exclusively for municipal or public purposes. Importantly, the exemption does not apply to property owned by a municipality and leased to a profit-making venture. 

Also, it's worth noting that there is a limit on the amount of revenue (through ad valorem taxes or other taxes) that Florida can raise in any given year. Specifically, state revenues collected during the fiscal year may not exceed the revenues collected in the prior year plus an adjustment for growth. A 2/3 supermajority vote is required in both houses of the legislature to raise or impose a new state tax or fee. 

Income & Sales Tax: Although there are corporate income taxes in Florida, there is no personal income tax. There's a 6% sales tax. Local governments can also impose sales taxes which will be in addition to any sales tax imposed by the state. 

Homestead Tax Exemption:

Homestead is defined, in part, as contiguous residential property owned by a natural person up to 1/2 acre within a municipality or 160 acres outside of a municipality. When assessing the value of Homestead for purposes of taxation, there is a tax exemption which decreases the property value by $50,000. Counties or municipalities may grant an additional $50,000 exemption for those aged 65 or older with incomes of $20,000 or less. In other words, with this exemption, the property value decreases, and with that decrease in property value, the amount taxed on the property is decreased as well. 

Fees:

Lastly, it's worth understanding the difference between taxes and fees. Fees may be assessed on users of government facilities. Local governments will also use fees (in addition to taxes) to supplement revenue. Some examples might include a fee for parking in government-owned lots or the fees to use a government-owned park. Because fees are not taxes, there is less regulation. (For example, although taxation might first require legislation, a fee will not.)

Fees, however, are not without restriction. The amount of the fee must be determined using a formula based on the per capita cost of using the facility. There should be no surplus: the fee should cover the cost of running the facility; it must not be intended to generate a profit. Further, the fee must be applied toward the facility.