Tax reform is one of the hottest topics in Florida real estate these days. In the past month, we've heard a lot of politicians applauding themselves for the passage of important new tax reform bills. They deserve the applause ? but only if they continue on the path they've begun. This is not the time for them to rest on their laurels. It is important for all of us to remember that the lawmakers have only partially addressed the inequities in the tax situation.

A few facts are indisputable:

Real estate taxes overall have doubled in the past ten years.

Save Our Homes has contributed to a serious inequity in the way that the tax burden is apportioned.

The combination of rising home values and rising taxes has made owning real estate in Florida an expensive proposition.

The separation of property owners into ?tax castes? has had a serious depressing effect on the Florida real estate market.

Tax reform must be a multi-pronged approach which addresses all of these issues.

Ten years ago, legislators realized that the combination of rising home values and rising taxes had created a situation where many long time homeowners were in danger of losing their homes. Because taxes are based on the home's assessed value, the sudden burgeoning of home and property values in many areas doubled and sometimes tripled taxes in a year. In order to address the problem, the legislature passed Save Our Homes. Save Our Homes was designed to limit the rise of taxes on primary residences by limiting the rate by which their tax assessments could rise to 3%. That means that if the home in which you live was assessed at $100,000 last year, this year its maximum assessment is $103,000 even if the actual value of your home rose to $400,000 this year.

Save Our Homes seemed like a good idea. The intention was a good one ? to ensure that no one was forced out of their home because their tax bill had suddenly become unaffordable.

Unfortunately, Save Our Homes had some unexpected consequences due to oversights in the amendment.

Save Our Homes is not portable. Thus, if you moved from one home to another of the exact same market value, your tax bill could suddenly triple. The effect of this was to ?trap? people in homes because they'd be unable to afford the taxes on a new home even though the home had the exact same value. In fact, within a few years of the amendment's passing, most people would have seen tax increase if they moved to a home with a far lesser value.

The effect of Save Our Homes is indirectly tied to the length of time that you've owned your property because the starting assessment is the market value of the home at the time that you bought it. Thus, two people living in identical condo units side by side in the same building could be paying widely different property taxes because they bought their units at different times.

Save Our Homes only applies to primary residences. While this may suit the original intent of the exemption, it has contributed to a rising inequity in tax rates between homesteaders and those who own property but do not live in it. Because municipalities were restricted in the amount of taxes that they could raise from homeowners, more and more of the tax burden fell on the shoulders of business owners, landlords, first time home buyers and snowbirds who own secondary residences here in Florida.

The recent bills passed by the legislature are a positive step. The House bill does two things:

It requires an immediate tax cut which will provide much needed tax relief to all property owners in Florida. Since this bill affects the overall tax revenues, its benefits will be felt by everyone. In addition, the tax cuts do not affect levies tied to education, which has been a major concern for many critics of the proposed tax cuts.

It caps the rate at which taxes can rise and ties it to the rise in per capita income in individual municipalities, counties and districts. Thus, taxes can only rise in sync with rises in per capita income.

The amendment proposed by the Senate addresses the inequities caused by Save Our Homes ? but does not eliminate them because it does nothing to address the unequal distribution of the tax burden, with the lion's share of it falling on those who own properties that are not their primary residences.

The proposed amendment begins the task of unwinding Save Our Homes, and does so without sharply affecting those who currently benefit from it. It does not, however, address the fact that renters, second homeowners, investors and business owners are unfairly shouldering more than their share of the tax burden. Under the new plan, homeowners will have the option to keep their Save Our Homes cap or move to the new system immediately. In fact, about 73% of homesteaders will benefit from an immediate change, as will new home buyers and first time home buyers. Those who are better off under the old system can elect to stay with it unless and until they move. Landlords and business owners will still pay more than their share of taxes because there is no exemption available to help them keep rents and business expenses low.

Those who purchase new homes will receive the same level of tax exemption as those who have lived in their homes for years, making the new amendment fairer to all homesteaders rather than giving those who have owned their properties longer ? or who are buying their first homes ? an unfair extra tax break.

The amendment also includes a personal property exemption for small business owners which will allow most businesses to exempt $25,000 in personal property from the property taxes, a substantial benefit. In addition, it allows the legislature to set lower assessment standards for certain properties, including waterfront and affordable housing properties, reserving the right to make further changes as their benefits become clear.

While the proposed amendment and tax cut are not cure-alls, they are an important first step in the right direction. The Florida Association of Realtors applauds the passage of the tax reform bills and supports the amendment that will be voted on by voters in January. FAR also, however, makes it clear that they will hold lawmakers responsible for finishing the job that they've begun. The new legislation will only mean anything if they continue to work toward restructuring the Florida property tax system to provide equitable distribution to all property owners in Florida ? even those who do not have a vote.