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In about-face, TaxWatch suggests ways to tax services, cut exemptions

TALLAHASSEE — Senate leaders said Thursday that they will embark on a multiyear effort to revamp Florida's tax structure — eliminating unfair sales tax exemptions this year, strengthening tax compliance and pursuing tax revenue lost over the Internet.

To aid the effort, Florida TaxWatch did the unthinkable — it compiled a list of sales tax exemptions that could be eliminated and proposed new taxes on services that the business-backed research group considers ripe for taxation. If all these are enacted, the state could raise $560 million.

Included on the list of potential services to tax: haircuts, dry cleaning and laundry, valet parking, photo finishing, pet care, fitness facilities, pest control, lawn services and sightseeing bus transportation. The annual revenue possible: $335.8 million.

TaxWatch also listed a total of $224.8 million in annual tax exemptions that should be considered for elimination, including those for charter fishing boats, bottled water, veterinary medicines, sales of religious items, movie theater concession rent, Super Bowl tickets and sales of U.S. and state flags.

"We're not saying go forth and tax these things," Dominic Calabro, president of TaxWatch, told the Senate Finance and Tax Committee on Thursday.

But of the more than $12 billion in sales tax exemptions in Florida's tax code, $10 billion includes food, medicine, housing and necessities. The TaxWatch list includes items from the remaining $2 billion that it considers "more likely'' to be repealed, he said.

TaxWatch has long opposed attempts to eliminate sales tax exemptions and introduce services taxes. It developed the $560 million list by using criteria that Calabro said included fairness, ease of administration, ability to encourage competition, predictability and public purpose.

It was a stunning development for Senate leaders, many of whom have supported Senate efforts to review the state's sales tax exemptions for several years, only to be challenged by business leaders and the more conservative House.

"Thanks for coming out and being bold," said Sen. Ken Pruitt, a St. Lucie Republican and former Senate president.

He said the Senate is committed to tax reform — not to find new money but to restructure the state's tax system to better fund Florida's education system and to lure high-tech companies to the state. The state faces more deep cuts to education and another $6 billion budget shortfall next fiscal year that many worry will offset the gains the state has made in recent years attracting biotech firms.

Senate Finance and Tax Chairman Thad Altman said he wants to increase tax enforcement to collect the estimated $200 million in lost revenue from tax cheats. He also wants Florida to become the first large state to join other states in urging the federal government to adopt a streamlined sales tax that will eliminate barriers to collecting taxes across state borders, primarily on Internet purchases.

In contrast, the House Finance and Tax Council has selected 51 sales tax exemptions for its members to review and has asked special interest groups that benefit from them to offer arguments to keep them. Council Chairwoman Ellyn Bogdanoff said the council will not repeal any exemptions that could affect Florida jobs or industries.

Altman said the Senate will take a broader approach and balance the long-term need for Florida to have a fair tax structure with the short-term impact on businesses.

"There is probably nothing that will lose more jobs in the state of Florida than not actively funding education," Altman said.

Altman said he will spend the next two legislative sessions focused on tax reform.

"It's going to take multiple years," he said. He added, "A lot can happen in six weeks in the session."

Mary Ellen Klas can be reached at meklas@MiamiHerald.com.

In about-face, TaxWatch suggests ways to tax services, cut exemptions 03/12/09 [Last modified: Thursday, March 12, 2009 11:16pm]
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