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When is a tax increase a tax decrease?

When the politicians who are raising the taxes are in charge of framing the debate.

Before we get too far into Collier County’s 2007 budget process, let’s go over some of the terminology that’s being used.

The property tax rate is the amount of tax charged per $1,000 of property value. In spite of what the politicians say, a reduction in the property tax rate is not the same as a tax reduction.

That’s because the property tax rate is only half of the formula used to determine a tax bill. The other half is a property’s assessed value. Assessed value is set by the property appraiser and is supposed to reflect the market value of a home, lot or business.

Because the value of property in Collier County has been escalating so fast, government pulls in more money, even if the property tax rate stays the same.

The money that property taxes generate is rising so fast, Collier County commissioners and staff are talking about reducing the tax rate. Don’t be fooled into thinking everyone’s getting a tax cut.

A reduction in the tax rate may or may not yield a lower tax bill, depending on other factors.

Among them is the homestead exemption. It allows a person to knock $25,000 off the taxable value of a home they live in.

More important is the Save Our Homes provision. It applies to homes that receive the homestead exemption and mandates that no matter what happens to the assessed value of a home, the value for tax purposes can go up by no more than 3 percent.

The county’s tax rate has been $3.90 per $1,000 of value. The owner of a house valued at $500,000 in 2006, if qualified for homestead exemption and Save Our Homes, would have paid $1,852 in county property taxes.

Talk now is to reduce the county’s property tax rate to $3.59 per $1,000 of taxable value.

The homestead house assessed at $500,000 in 2006 almost certainly would be assessed at $515,000 for 2007, the maximum increase allowed under Save Our Homes. The house would generate a county tax bill of $1,759 under the proposed millage rate, an actual tax cut of $93.

But what of those properties that don’t qualify for the homestead exemption and Save Our Homes?

In 2006, a $500,000 house not qualifying for the breaks paid $1,950 in county taxes. On average, existing properties went up 22 percent from the 2006 assessment to the 2007 assessment. That would mean the $500,000 house would be valued at $610,000 for tax purposes in 2007. Even with a reduced property tax rate, the owner would pay $2,190, a tax increase of $240.

You’ll hear a lot of talk from the County Commission dais about “giving money back to the taxpayers.” That relies on the erroneous proposition that money belongs to the government to begin with and ignores that fact that many taxpayers will write a tax check in 2007 that is larger than the one they wrote in 2006.

If your baker charges a $1 for a loaf of bread, considers raising the price to $1.50 before settling on $1.25, it can hardly be said he’s giving you back 25 cents.

Only about 77,000 of the 160,000 residential properties in Collier County qualify for the homestead exemption. The tax burden falls, and will continue to fall, most heavily on nonresidents. That works out well for residents and politicians who rely on residents’ votes, but doesn’t always come through in the rhetoric of budget season.

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E-mail Brent Batten at bebatten@naplesnews.com