Want to wipe out high property taxes? End exemptions to sales tax, study says
By Jamie Malernee
South Florida Sun-Sentinel
March 16, 2007
In Florida, clothing and gasoline are taxed, but Super Bowl tickets and cow steroids aren't.
In fact, so many items are exempted by law from the state's sales tax that if those loopholes were closed, state legislators could reduce or even eliminate property taxes on residents' homes, according to official state estimates released Thursday.
Instead, Republican and Democratic legislators have proposed raising the sales tax; one plan would make it the highest in the nation.
Items exempt from the 6-cent-per-dollar state tax range include necessities such as food and medicine and oddities like ostrich feed, human organs, fish breeding products and fill dirt.
And rather than revoke special privileges for even a sizable fraction of those items, state legislators this year have proposed a new crop of sales tax exemptions, including breaks for anyone buying a part-ownership in a private jet.
"A lot of the exemptions one cannot defend with a straight face," said former Senate President John McKay, who has long lobbied in vain for reform of the sales tax system. Scrap all the exemptions, the Bradenton Republican said, and "you could eliminate all of the property taxes, and reduce the sales tax."
McKay sits on the state's Taxation and Budget Reform Commission, which meets today in Tallahassee. The panel of 25 members appointed by Gov. Charlie Crist and the leaders of the Senate and House can recommend changes in state taxation and spending policies to the Legislature, or directly to voters in referendums.
Sales tax exemptions in effect this year add up to big money -- roughly $12.3 billion in forgone revenue, according to the 2007 Florida Tax Handbook, an annual report compiled by the Legislature and executive branch.
Services are also not taxable under Florida law. That means an additional estimated $23.4 billion that could be raised from taxes on work ranging from legal services to lap dances.
Yet another untapped revenue source is remote Internet sales, which would have generated $2 billion in sales taxes this year, according to Florida TaxWatch, a nonprofit research institute.
To put those sums in perspective, the most radical property tax plan, written by House Republicans, would raise the sales tax by 2.5 cents per dollar to offset $7.8 billion in property tax cuts. End the sales tax exemptions, including those for food and medicine available to all Floridians, and the government would raise that sum -- and $4.5 billion more, state estimates show.
Repealing exceptions to the tax code, however, is unpopular at the state Capitol.
This is the fifth year that Sen. Bill Posey, a Republican from Brevard County, has proposed ending the tax breaks on ostrich feed and skybox tickets to sports events. Each year, the bills have died, he said. "It just doesn't make sense to me that the people in the cheap seats pay sales tax and the jet-setters [in skyboxes] don't," Posey said.
But there aren't enough bad exemptions that deleting them would bring in enough state income to abolish property taxes, he said.
McKay doesn't endorse a blanket repeal of exemptions either but hopes legislators look at eliminating some before voting any increase in the sales tax rate.
Every exemption, of course, has its impassioned advocates. Donald Goodsell, a former ostrich farmer from North Florida, said the break given on ostrich food was once needed to help a struggling industry.
But it didn't help enough, Goodsell said, and now there are no ostrich farmers left in the state.
Kurt Wenner, a senior analyst with Florida TaxWatch, said many exemptions have been created to help Floridians pay for requirements -- from school supplies to flashlights for use in a hurricane -- or to promote economic development.
Others are meant to promote various causes that the Legislature deems worthy. Bills now in the works, for instance, would refund the sales tax to anyone who buys an energy-efficient car that runs on alternative fuels.
Still, Wenner estimated about $1 billion in exceptions should be examined closely.
"The government should view tax exemptions like it does tax expenditures," he said. "Is it worth the other things you could have done with the money?"
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