Florida tax plan would slash property tax, boost sales tax

By Alex Leary and Steve Bousquet, Times Staff Writers
In print: Tuesday, March 18, 2008

John McKay, second from left, listens to debate on his tax idea on Monday. Others on the taxation commission are, from left, Nancy Riley of Clearwater, Darryl Rouson of St. Petersburg and former Sen. Les Miller of Tampa.
	[STEVE BOUSQUET | Times]

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TALLAHASSEE — Florida voters in November will get the historic option to cut their property taxes by 25 percent or more. But they also would be agreeing to a higher sales tax.

A powerful state commission on Monday approved a ballot measure that would eliminate most property taxes for schools but require the Legislature to find replacement revenue through a 1 cent sales tax increase and other revenue sources.

If approved by voters, the plan would take effect in 2011, saving property owners $9.3-billion. It would be the most far-reaching change to Florida's tax structure in two decades.

By a 21-4 vote, the Taxation and Budget Reform Commission effectively placed the measure on the Nov. 4 ballot. It will require a 60 percent voter approval. But as the 64 percent approval of Amendment 1 showed in January, the public is eager for tax relief.

"It's a noble effort, and I think it will help all Floridians," said chief sponsor John McKay, a Bradenton real estate broker and former president of the state Senate.

"It's changing the structure of the tax system — one that's more fair to all Floridians, not one that shows an advantage to special interests," added McKay, who has tried for years to eliminate sales tax exemptions.

Currently, every property owner in Florida pays 4.843 mills in property taxes for the state's "required local effort" for schools. If the plan is approved by voters, property owners would save $484 for every $100,000 in taxable property value. Other, much smaller discretionary school taxes levied by individual counties would not be affected.

A 1-cent increase in the state's sales tax, to 7 percent, would generate $3.3-billion to $3.9-billion annually, under current estimates. Roughly a quarter of that would be paid by out-of-state visitors and businesses.

It would then be up to the Legislature to figure out how to generate roughly $5-billion more to pay for schools, either through eliminating sales tax exemptions, cutting state spending or finding other revenue sources.

But McKay's plan falls short of a dramatic overhaul of the state's inequitable property tax system that favors longtime homestead property owners over everyone else. It will not change Save Our Homes, the popular 3 percent cap on property tax assessments for homesteaded homeowners.

"Nothing in this proposal will fix the brokenness," David Daniel, a lobbyist for the Florida Chamber of Commerce, told the panel.

Monday's vote was a compromise. McKay backed off on a requirement that part of the money be made up by expanding the sales tax to services provided by attorneys, barbers and others. And commission members yielded to tremendous public and political pressure to act.

"You're our last hope," House Speaker Marco Rubio, who attempted a similar plan last year only to get shut down by the Senate, implored before the vote. "If you're waiting on the Florida Legislature to cut taxes, it isn't going to happen."

The action comes less than two months after voters approved a different, less substantial round of cuts known as Amendment 1. That plan crafted by the Legislature and Gov. Charlie Crist was approved soundly but resulted in meager savings.

"The people grabbed relief on Jan. 29, but they are still clamoring for reform, true reform," said commission member Darryl Rouson of St. Petersburg.

Crist avoided taking a hard stance on the commission's proposal. At midafternoon, he said he had not seen the full proposal.

Business interests blasted the ballot measure as shortsighted and still others said the state will have a hard time making up billions for schools.

"A sales tax is a regressive tax, there's no way around it," said commissioner Randy Miller, who is also vice president of the Florida Retail Federation. "We're not doing anything here except changing who pays the bill."

There is no clear consensus on how the Legislature would find the other $5-billion for schools, whether through elimination of sales tax exemptions or other revenue. Business interests will work hard to protect their sales tax exemptions and may even fund a campaign to defeat the November ballot measure.

The approved plan is silent on the question of whether to extend the sales tax to services like accountants and architects, lawyers and limousines — a concession McKay made in order to gain approval for the plan.

But Miller and other business interests suggested that may be the only way to turn because eliminating sales tax exemptions will not even cover half of the hole left after the sales tax increase.

Rubio, who lobbied aggressively for the plan, said opponents underestimate the additional revenue that will come when Florida's real estate market rebounds under the cuts.

"They are not understanding what's going to happen to our economy when you give people thousands of dollars back in their pocket to go out and spend," Rubio said.

The proposal would also slash to 5 percent the 10 percent assessment cap for nonhomestead property, approved as part of Amendment 1.

There is still a technical hurdle to the measure being on the ballot. Final ballot language is still being drafted and will require a final vote by the full 25-member commission.

The proposal, CP2C1, can be found online at floridatbrc.org.

Times staff writer David DeCamp contributed to this report. Alex Leary can be reached at aleary@sptimes.com.