Voters will have say on tax cut in November

By Alex Leary, Times Staff Writer
In print: Friday, April 25, 2008

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TALLAHASSEE — Florida voters will decide in November whether to cut property taxes by about 25 percent through a dramatic shift in the way schools are funded.

But the plan would lead to a higher state sales tax and put lawmakers under immense pressure to replace billions in lost school taxes. It was placed on the ballot Thursday by a powerful tax commission.

"This is our opportunity to give Floridians the opportunity to improve and modernize their tax system," said lead sponsor John McKay, who serves on the Taxation and Budget Reform Commission.

But opposition was already mounting Thursday, suggesting a deeply funded campaign to defeat the measure is in the making.

Business groups pilloried the idea as a danger to the economy, not only through a 1 cent or more sales tax increase, but also because it raises the possibility of taxing services, such as for lawyers and accountants. The measure could also lead to the repeal of some special interests' sales tax exemptions.

"I'm 99 percent certain someone will sue" over the way the commission adopted the plan, said Barney Bishop, president of Associated Industries of Florida.

"This is a bad, bad proposal," said Randy Miller of the Florida Retail Federation and a tax commission member.

The plan needs 60 percent voter approval in November and would not go into effect until 2011.

Only days ago, Miller and a legion of other critics appeared to be succeeding in turning support against the plan, which the commission had already given preliminary approval last month by a 21-4 vote.

On Thursday, the final vote was 18-7, just one more than the 17 votes needed.

It appeared McKay, a former Senate president from Bradenton, may have shored up support for his plan by agreeing to back a controversial school voucher plan that will be voted on today. McKay had previously helped vote down the plan — a move that angered other commissioners partly because there is a voucher program for disabled children that bears Mc­Kay's name.

McKay voted with others Thursday to reconsider the voucher proposal. If placed on the ballot and approved by voters, it would negate a provision in the state Constitution requiring a "uniform system of free public schools." The Florida Supreme Court cited the clause in 2006 when it tossed former Gov. Jeb Bush's Opportunity Scholarships.

McKay denied a quid pro quo was at work. He said he did not fully understand the voucher program before.

The so-called tax swap would replace most school property taxes — the part referred to as the "required local effort" — and give the Legislature guidance in how to replace the loss revenue, estimated between $9-billion and $11-billion.

The plan includes language requiring that schools be "held harmless" and a formula for growth in funding.

Options for replacement money include a 1-cent sales tax increase (raising $4-billion, at best), elimination of existing sales tax exemptions, budget cuts and other revenue sources.

There is some disagreement whether "other" could mean another penny sales tax increase.

Commission member Mike Hogan, who was one of three to change his earlier support for the plan, called the provision a "bait and switch" on voters who might think the sales tax would go up only a penny. The current statewide sales tax is 6 percent.

More worrisome to some is that the plan could lead to a tax on services. However, it would not apply to real estate fees or stock transactions. The state tried to impose a services tax in 1987 but quickly backed off in the firestorm that followed.

Sen. Mike Haridopolos, R-Melbourne, who will likely lead the Senate in 2010 when the funding plan must be adopted, attacked it from all angles in the past few weeks.

An analysis by Senate budget staffers shows that there would be a more than $3-billion hole even after other revenue sources are accounted for.

But the analysis ignores savings that could be achieved by cutting the budget and the possibility of a higher sales tax. "I didn't come to Tallahassee to raise taxes," Haridopolos said, adding he will "aggressively" campaign to defeat the proposal.

Advocates say the services tax argument is a red herring, pointing out that the Legislature currently can impose one but knows how radioactive that would be.

"It doesn't do anything to say there is a services tax or put it into the Constitution," said commissioner Jim Scott, another former Senate president.

As an incentive at the polls, the plan also provides a 5 percent assessment cap for nonhomestead property. Amendment 1, another round of property tax cuts voters approved in January, set the cap at 10 percent.

"We need to let the people of Florida decide this issue for themselves," said commission member Carlos Lacasa, a former legislator from Miami. "They know what the stakes are. And they also know what the benefits are."