Eleanor Finch
Florida Amendment 5, the Annual Inflation Adjustment for Homestead Property Tax Exemption Value Amendment, was on the ballot in Florida as a legislatively referred constitutional amendment on November 5, 2024. It was approved with 74.49% of the vote. The amendment ties part of a person's homestead exemption to a yearly inflation rise. This means that if inflation goes up, so would the exemption. Amendment 5 has been criticised for exacerbating inequality in Florida, cementing in place the state's inequitable tax system and low investment in public services.
| Characteristics | Values |
|---|---|
| Purpose | To adjust for inflation the value of current or future homestead exemptions that apply solely to levies other than school district levies |
| Impact | Reducing local government property taxes |
| Voters | 74.49% in favour, 25.51% against in 2020 |
| Florida House of Representatives vote | 86 in favour, 29 against |
| Florida State Senate vote | 25 in favour, 15 against |
| Existing homestead exemption | $25,000 |
| Additional homestead exemption | $25,000 on a homestead's value between $50,000 and $75,000 |
| Effect on inequality | Likely to deepen inequality in Florida |
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What You'll Learn
Florida's tax system
The state has no personal income tax, and instead relies heavily on sales and excise taxes, with an average local sales tax rate of 1%, bringing the state's combined average rate up to 7%. Counties are allowed to add a discretionary sales surtax, with current rates ranging from 0% to 2%. Florida also has no inheritance or estate tax, making it one of the most tax-friendly states for older workers and retirees, with tax-free pensions and retirement pay.
Property taxes in Florida vary widely by county, with an average rate of 0.79% of a home's assessed value in 2023. Each county, school district, city, and special district sets its own property tax rates. Homes are assessed at market value, minus the homestead exemption, which reduces the taxable value of a property. Every primary residence is eligible for a $25,000 homestead exemption, with an additional $25,000 exemption applied to a homestead's value between $50,000 and $75,000.
In 2024, Florida Amendment 5, the Annual Inflation Adjustment for Homestead Property Tax Exemption Value Amendment, was approved by voters. This amendment ties part of the homestead exemption to yearly inflation, meaning that as inflation rises, so does the exemption. This amendment will take effect on January 1, 2025.
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Inequality in Florida
Florida has one of the most unequal tax systems in the United States, with families with the lowest incomes contributing the most as a share of their earnings. The state's tax structure is described as ""upside-down", with the lowest-income families paying the highest percentage of their incomes in taxes, while the highest-income families pay the lowest percentage. This system perpetuates wealth inequality and disparities across racial and ethnic lines. African Americans and Latinos are disproportionately represented in the lowest income groups and are therefore subject to the highest effective state and local tax rates.
Florida's tax system is compounded by a lack of investment in public services, ranking 50th in the nation for per-person spending. This underinvestment disproportionately affects communities of colour, who already face barriers to financial stability and economic mobility. Florida's public education system, for example, has seen a downward trend in investment per pupil, despite a growing diversity in its student population.
The state's economic inequality is further exacerbated by a regressive tax structure that provides special tax breaks to large corporations while failing to address the income gap. According to a report by the Economic Policy Institute, the top 1% of families in Florida earned 39.5 times as much as the bottom 99% as of 2015. This disparity has worsened over time, with the top 1% accruing a disproportionate amount of income gains.
Miami-Dade County, in particular, exemplifies the stark contrast between extreme wealth and deep poverty. With one of the highest concentrations of billionaires globally, Miami's prosperity is not equally shared among its residents. The area's economy relies heavily on tourism, hospitality, and service jobs, which offer some of the lowest wages in the country. As a result, many residents struggle with housing affordability, as high housing costs and low wages leave them with little disposable income.
Amendment 5, which was approved by voters in 2024, addresses property tax exemptions and ties them to annual inflation adjustments. While this may provide some relief to homeowners, it also means a loss of revenue for cities and counties, potentially impacting their ability to address inequality through investments in public services.
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Florida's public services
Florida Amendment 5, the Annual Inflation Adjustment for Homestead Property Tax Exemption Value Amendment, was on the ballot in Florida as a legislatively referred constitutional amendment on November 5, 2024. It was approved with 60% of the vote. The amendment ties part of an individual's homestead exemption to yearly inflation, meaning that if inflation rises, so will the exemption.
The Florida Public Service Commission (FPSC) is another public service in the state. The FPSC regulates investor-owned electric, natural gas, and water and wastewater utilities. The FPSC facilitates competitive markets in the telecommunications industry, has authority over intercarrier disputes, and oversees pay telephones, the federal Lifeline Assistance Program, and the Telecommunications Relay Service. The FPSC also provides educational brochures to Florida public libraries for consumer distribution.
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Florida's Amendment 5 and homestead exemption
Florida Amendment 5, also known as the Annual Inflation Adjustment for Homestead Property Tax Exemption Value Amendment, was on the ballot in Florida as a legislatively referred constitutional amendment on November 5, 2024. It was approved by 60% of voters.
The amendment adjusts the way that homestead exemptions are calculated in relation to inflation. Every primary residence in Florida is eligible for a $25,000 homestead exemption, which reduces the taxable value of a property. This basic exemption is not changed by Amendment 5. However, the amendment does impact the second exemption. This is applied to the value of a homestead between $50,000 and $75,000 and applies to all taxes except school district taxes. Amendment 5 ties this second exemption to a yearly inflation rise. If inflation goes up, so will the exemption.
The amendment will take effect on January 1, 2025, and will insert new language into the homestead exemptions section of Article VII of the Florida Constitution. This will mean that the $25,000 amount of assessed valuation exempt from taxation will be adjusted annually on January 1 for inflation using the percent change in the Consumer Price Index for All Urban Consumers.
The amendment has been criticised for potentially reducing tax revenues for local governments, which could impact funding for police, fire, roads, and parks. It has also been argued that Amendment 5 will deepen inequality in Florida, as it locks in the state's upside-down tax system, where low-income families contribute the highest percentage of their incomes in taxes, while high-income families pay the lowest percentage.
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Florida's Amendment 5 and supermajority requirement
Florida's Amendment 5, the Annual Inflation Adjustment for Homestead Property Tax Exemption Value Amendment, was on the ballot in Florida as a legislatively referred constitutional amendment on November 5, 2024. It was approved by voters, although it needed to receive 60% of the vote to pass.
The amendment ties part of a homeowner's homestead exemption to a yearly inflation rise. In other words, if inflation goes up, so does the exemption. This would amend Article VII and Article XII of the state constitution.
Amendment 5 adjusts the current exclusion of $25,000 of a home's assessed value for tax purposes, based on inflation according to the consumer price index. This would not apply to school taxes.
Florida has one of the most inequitable tax systems in the nation, with low-income residents and communities of colour facing barriers to accessing financial stability and economic mobility. Amendment 5 would restrict investments in Florida's future, exacerbating the impacts of the state's underinvestment in critical priorities.
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Frequently asked questions
Florida Amendment 5, the Annual Inflation Adjustment for Homestead Property Tax Exemption Value Amendment, was a legislatively referred constitutional amendment on the ballot in Florida on November 5, 2024.
Amendment 5 ties part of a homeowner's homestead exemption to a yearly inflation rise. If inflation goes up, so would the exemption.
The state's Revenue Estimating Conference predicts that Amendment 5 will slightly reduce local government property taxes.
Amendment 5 will deepen inequality in Florida. It will cement in place Florida's inequitable tax system and low investment in public services, locking in inequality for generations to come.
