In good times or bad, recommended tax rate cuts are elusive

As the total taxable value of Miami-Dade properties keeps rising, property appraisers keep telling the other elected officials who will end up making the decisions to lower their tax rates. 

That’s a pleasing suggestion that’s unlikely to be heeded, particularly in Miami-Dade County as the mayor and commissioners lament that the tightening of federal cash flows coupled with needs of newly independent fiefdoms like the sheriff’s office are sending revenue needs soaring.

In a message that Property Appraiser Tomás Regalado included last week with the county’s annual estimate of taxable values, up 8.5% last year, he predicted that the property value surge since the pandemic is about to grind to a halt, bringing “a value decrease in certain markets.”

Foreseeing a trend of slowing value gains or actual decreases, he wrote, “I urge my elected colleagues to consider reducing their respective tax rates to alleviate the housing crisis.”

In 2023, citing “the steep increase in values, driven by a heated real estate market, which will force many property owners to pay higher property taxes, which many cannot afford,” then-Appraiser Pedro Garcia urged the county, cities and school board “to consider a 3% reduction in their respective millage rates to help our residents cope with the increased cost of home ownership.”

If we heed the advice of Mr. Regaldo and Mr. Garcia, the thing to do is cut tax rates when property values are rising and cut tax rates when property values are falling. Sounds great as a taxpayer, but I’m not sure it’s a palatable policy for anyone trying to run a government.

Other than the need he sees to cut tax rates, Mr. Regalado pointed to the $8.2 billion value of new construction in the county last year that was on the tax rolls as of Jan. 1. That was up from the $6.3 billion value of new construction in 2023. 

New construction builds tax revenues beyond the increased tax value of existing buildings, swelling government receipts, so even a cut in rates could yield more revenue for governments.

Increases in taxable property values vary by community. Virginia Gardens, for example, saw an increase of just 1.4%, while in El Portal the jump was a stunning 33.4%.

But in those communities another variable also comes into play: Virginia Gardens’ 1.4% increase was totally in value of existing properties because new construction was nearly nil, while El Portal’s increase for existing properties was only 11.4% but $68 million in new construction ballooned the total rise to 33.4%.

Local governments are likely to consider whether it’s existing residents or new construction that will be more heavily affected by any tax rate changes.

By far the one area with the most new construction value added last year was the City of Miami, which had more than $3 billion in new construction to bring total city taxable value to $103.4 billion. While the city’s existing properties rose 6.6% in value, total values in the city rose 9.8%, a gain of more than $9.2 billion in taxable value.

Most of that gain in Miami, in turn, was in the Downtown Development Authority district, which now totals $32.5 billion in value. Values of existing structures rose just 2.5%, far below the countywide average gain of 6.8%, but new construction pushed total gains to 8.1%, just a little below average.

Among larger cities, Miami Beach’s taxable value rose 6.9%, Coral Gables’ values rose 8.5%, Hialeah’s rose 10.5%, North Miami’s 7.9%, Aventura’s 4.8%, Miami Gardens’ 9.7%, and Doral’s 7.9%.

The unincorporated area – which is larger in value than the biggest city, Miami – gained 8.7% in total value, bolstered by $1.6 billion in new construction.

Another notable figure is the property values upon which school taxes will be based. They rose just 3.6%, far below the increase of 8.4% for library taxes, 8.6% for fire and rescue taxes and 8.5% for the Children’s Trust.

These values, it must be noted, are estimates. Mr. Regalado must release final, firm values by July 1. It will be those numbers upon which taxes will be based. 

Governments must set their tax rates before notices are sent to taxpayers in August. They can later cut the rate below the amount on the notice but can’t raise the rate above the notice figure.

Nevertheless, few rate cuts are likely.

Nobody likes Mr. Regalado’s suggestion of rate cuts across the board more than I do. Like almost everyone, I am certain that despite cries of hard times, the county and cities don’t really need the average 8.5% tax revenue increase that current tax rates would provide based on property value gains.

At least, they don’t need that money more than the taxpayers do.