Posted on Wed, Feb. 21, 2007
Tax switch could bring relief, pain
House leaders want to swap a sales tax hike for eliminating homeowners' property taxes.
BY MARY ELLEN KLAS AND MARC CAPUTO
meklas@MiamiHerald.com
TALLAHASSEE - Lawmakers in the state House of Representatives are ready to stop charging many Floridians property taxes -- by making the state's sales taxes the highest in the nation.
Today, House Republican leaders will unveil their proposal to eliminate homeowners' property-tax bills by raising the six-cent state sales tax by 2.2 cents.
Under the plan, which must be approved by voters in a constitutional amendment, homeowners would no longer pay any property taxes whatsoever. Owners of commercial properties and non-homesteaded homes would continue paying all local-government property taxes, which would be capped and scaled back to 2001 or 2002 levels -- before the real-estate market boomed and local government spending skyrocketed.
The plan, which House Speaker Marco Rubio called a ''starting point,'' could lower property taxes across the state by more than $12 billion. But it's fraught with unknowns and potential perils.
In addition to making Florida's base sales-tax rate the highest in the nation -- California is now the highest, at 7.25 cents per dollar, the proposal would shift even more of the sales-tax burden to businesses. Businesses, which pay about 40 percent of sales taxes now, could see shoppers cut down on spending or head to other states or the Internet. The poor would see a disproportionately higher amount of their wages pay for government.
And it could lead to higher federal income tax payments, because people would lose the property-tax deduction that they now receive. Though state sales taxes are currently deductible, that deduction will end after next year.
''We're doing the best we can to do comprehensive reform for everybody, but it's going to hit some people differently than others,'' said Rep. Dave Murzin, a Pensacola Republican and leading proponent of the change in the House.
The proposed tax shift would also expose cities and counties to the same economic pitfalls the state faces when its sales-tax-based budget shrinks because of a downturn in the economy.
On the eve of announcing his plan, Rubio, a West Miami Republican, released a letter to lawmakers telling them to hold back on spending because, for the first time in years, sales-tax collections are projected to be lower than expected.
Rubio warned that because of a potential $600 million shortfall in sales-tax revenues, legislators should be ready to face the prospect of getting almost none of the $3.2 billion in bring-home-the-bacon projects they have requested. More than $1 billion of those requests were for projects in Miami-Dade, Broward and Monroe counties.
GOOD AND BAD
The ''good news,'' Rubio wrote, is that the state will be able to pay to continue all of its services. ''The bad news,'' he said, ``is that a continuation budget does not include funding for program expansions, new initiatives or member projects.''
That could mean one perennial proposal -- to give a $60 million tax break to help the Florida Marlins build a new ballpark in Miami -- is in trouble, as is an $800,000 item to improve Las Olas Boulevard in Fort Lauderdale or the $2 million to pay for Key Biscayne sewer improvements.
Murzin and other proponents were pleased they had crafted a solution that allows them to avoid a debate over how to fix the inequities of the Save Our Homes tax assessment cap that benefits longtime homeowners at the expense of all others.
House leaders also want to cap local government revenue and limit their spending to levels before the real-estate boom.
Miami-Dade County Manager George Burgess was skeptical.
''It would certainly have an impact and I doubt very much that it would be positive,'' he said.
Legislators want to give local governments the option to battle tough financial times by asking voters to approve higher taxes on commercial and nonresidential properties than allowed by the cap.
Cities are open to the option of trading property taxes for sales taxes, said John Wayne Smith, lobbyist for the Florida League of Cities, because it helps diversify their economy.
''We agree the system is messed and we agree there's a lot of inequities. Our problem is we can't pick our revenue sources,'' Smith said.
The idea has been greeted with mixed reviews from cities and counties and with downright skepticism from the Florida Senate, which has yet to unveil its plan for property-tax reform.
''My biggest concern is for two groups: The poor everywhere and for business owners,'' said Sen. Jim King, a Jacksonville Republican and a top Senate leader. ``We already know that the sales tax is a regressive tax that hits poor people the hardest. I'm not sure this is the best way to go.''
AN OPEN MIND
Gov. Charlie Crist, who has proposed his own property tax reform plan that did not include raising sales taxes, said he was keeping an open mind.
''The important thing is that we reduce taxes,'' he said. ''I don't want to prejudge any'' proposals.
When it comes to higher taxes, every lawmaker shares some blame.
Locally, property-tax collections more than doubled in the past decade, from $12.3 billion statewide to $30.5 billion, while the average Floridian's income has increased at a far more modest rate. State tax collections have jumped from $23 billion to $40 billion in that time.
And when it comes to state-mandated school spending, the Legislature has, over the past 15 years, increased local property taxes by $7.8 billion -- a 154 percent increase.
Burgess of Miami-Dade offered lawmakers advice: ``Don't make matters worse.''
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