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Florida Property Tax plan forces hand of lawmakers
By Alison Markham, Broker-Associate, GRI, Realtor® | March 21, 2008
TALLAHASSEE, Fla. – March 20, 2008 – The tax cut that voters will be asked to approve in November will do more than save property owners money. It will force lawmakers to do what they have refused to do for nearly 70 years: modernize sales-tax rules to raise revenue from products and services that have never been taxed.That is exactly what the powerful Taxation and Budget Reform Commission intended Monday when it asked voters to eliminate the schools portion of all property taxes and replace it with a penny hike in the sales tax and, potentially, new taxes on services such as charter boats, symphony tickets, dry cleaning and limousines.
With a 21-4 vote, the politically diverse panel accomplished what former Senate President John McKay and current House Speaker Marco Rubio couldn’t do at the height of their legislative power: produce a constitutional amendment that delivers property-tax cuts while broadening the state’s sales-tax base. “It’s an attempt to change the structure and make it more fair and resilient,” said McKay, a commission member and the amendment’s sponsor.
When McKay was Senate president in 2001-02, he tried to revamp the sales-tax system to raise enough money to meet the growing state’s needs while shielding Florida’s aging population from a rising tax burden. He failed again in 2004 to do it through a voter petition drive.
Now, the state’s struggling economy, stagnant real estate market and voter demand for property tax relief provided the extra impetus McKay needed to win the votes for a plan to force the Legislature to expand Florida’s shrinking sales-tax base.
The tax commission, which meets every 20 years, has the power to put on the ballot proposals it believes are needed to prepare the state’s tax and budget system for the next two decades.
McKay’s proposal converged with a key goal of Rubio’s, who last year tried to repeal all property taxes on primary homes and replace the money with up to 2 cents in sales taxes and massive cuts in government spending. Rubio’s plan failed when he couldn’t get support in the Senate.
Perfect marriage
So when McKay suggested replacing the portion of property taxes that pay for schools with a penny increase in the sales tax and other revenue, he found in Rubio a strong and vocal ally.
“It was like the perfect marriage,” said Martha Barnett, a Tallahassee lawyer and commission member who voted for the amendment. “Like the king of England marrying the princess of Spain. We had people of very different starting points finding common ground on something that accomplished different agendas.”
To commission member Carlos Lacasa of Miami, a former legislator, it’s the perfect way to force the Legislature to do the tax changes it has resisted for decades.
“The commission exists to make decisions free of political considerations and we have done that,” Lacasa said. “It gives the Republican majority political cover when they have to levy taxes.”
Rubio leapt at the chance to push the new McKay plan and claim victory for his tax-swap idea. He allowed Commissioners Patricia Levesque and Lacasa to use House staff to draft elements of the proposal that were merged into the McKay plan. He also lent help from House economic advisor Donna Arduin, the former state budget director for governors Jeb Bush and Arnold Schwarzenegger, who helped persuade conservative members of the panel that the approach made sense.
Finally, late last week when it came time to count the votes before Monday’s meeting, Rubio and others went to work. Rubio called the seven members of the commission he had appointed, told them not to miss the meeting and urged them to support the plan. They all did.
Former Gov. Jeb Bush, who as governor had sparred with McKay over expanding the tax base, also stepped in. He called members of the commission he knew well and urged them to vote for the plan.
Arduin answered commissioner’s questions and argued that property taxes are “the worst form of taxes” because they are levied on an asset year after year and people have no control over them, unlike, say, how much they spend at a store.
Her argument was buoyed by the state’s chief economist, Amy Baker, who told the commission that the state’s sales-tax revenue, as currently set up, would decline as the population ages and many elderly residents become poorer.
In a presentation last year, Baker told the commission that Florida’s economic growth is fueled by population growth and, in the next 20 years, most of the growth will come from people ages 60 and older, with fewer newcomers of working age.
“An increasingly smaller percentage of individuals will assume the bulk of the tax burden as the number of elderly increases and the demand for services continues to grow,” Baker said.
Because the elderly tend to spend less on big-ticket items such as furniture and cars, revenue under the current sales-tax system will increase more slowly than in the past, she said. And property taxes, traditionally opposed by seniors because they depend on fixed incomes and have no children in schools, will become increasingly unpopular.
Compelling
Those demographics became a driving force in the deliberations of the commission, said Levesque.
“When [Baker] connected sales taxes with property taxes, it was so compelling,” Levesque said. “She showed how much of the sales tax came from furniture, painting, home repairs – all of the things that come along with people moving and buying homes. We’re seeing this lull in our sales-tax revenue because of the real-estate slowdown.”
Commissioners also held public hearings and heard stories from property owners.
“Everywhere in the state we heard from little mom-and-pop businesses who came with their bills and we’re being taxed out of sight,” said Jim Scott, the commission vice chairman and a former Broward County commissioner.
To McKay and Rubio, the proposal that goes before voters in November vindicates them.
“I give a lot of credit to members of the House,” Rubio said. “Because if we hadn’t discussed and debated a tax swap, people might not have had this much comfort in doing it.”
Said McKay: “My goal has always been to structure a tax system that is fair and resilient in the 21st century.”
Copyright © 2008 The Miami Herald, Mary Ellen Klas. Distributed by McClatchy-Tribune Information Services.
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