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Tax plan gives hope of reform

In print: Sunday, March 23, 2008

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The constitutional amendment the Florida Taxation and Budget Reform Commission has voted to put on the November ballot is far from perfect. It offers concrete property tax relief, a certain sales tax increase and only the possibility of tax reform. Yet there is that glimmer of hope where none exists now, and this amendment probably is the best that can be expected from this commission. The proposal is worthy of a full public discussion and a place on the ballot so voters can decide its fate.

The promise of this amendment is that it would require the Legislature to confront head-on what it has avoided for decades: an out-of-date tax system, featuring a sales tax riddled with special-interest exemptions, that should be broader and fairer. It forces the issue by putting on the table what is precious to all, the future of public education. Some $9-billion in property taxes spent on schools would disappear. Lawmakers would be required to replace the money, and the amendment lists four options: Raising the 6-cent statewide sales tax by 1 cent; cutting other state spending; closing sales tax exemptions; and raising undefined taxes.

The math suggests legislators would have to make the sales tax broader. Raising the existing sales tax by a penny would raise less than half the money needed to hold public schools harmless. Cutting spending to cover the rest would be politically impossible. That would force legislators to close some existing sales tax exemptions. The amendment is silent on extending the sales tax to services such as dry cleaning and accounting, but any responsible plan would have to tax some of them.

This is not the shortest way or the best way toward creating a broader tax base, but it may be the only way. The Legislature will not do it. The commission, which meets once every 20 years, approved this amendment only because the compromise attracted support from both tax reformers and tax cutters. On the reform side were allies of commission member and former Senate President John McKay, who deserves enormous credit for his yearslong effort to broaden the tax base and compromised to get enough support. On the relief side were allies of House Speaker Marco Rubio, who irrationally detests property taxes and insists on taxing consumption instead of wealth. The Miami Herald reported Rubio and former Gov. Jeb Bush called commission members and urged them to vote for the amendment. Without this convergence of different interests, the only possibilities left would have been more radical tax cuts with fewer redeeming features.

This amendment has plenty of faults. It would force public education to rely on a less stable source of revenue than it has now. It would increase the state's dependence on the sales tax and result in a regressive tax increase. Raising the sales tax for this use would reduce the local options for raising revenue for mass transit or health care. And there is no ironclad guarantee legislators would broaden the tax base by taxing services, which was the original idea.

Yet progressive tax policy is no match for political realities in Tallahassee, and the amendment could accomplish some good things. It would provide a significant property tax cut that would be across-the-board, unlike the flawed Amendment 1 approved by voters in January. It would require the state to take back significant responsibility for funding public schools instead of continuing to shift the obligation to local property owners. It would increase the pressure on legislators to broaden the sales tax base, close exemptions and tax some services.

The shortcomings of this amendment would be difficult to swallow, but the benefits cannot be easily dismissed. Those positives are why business lobbyists and some Republican legislators already are suggesting that the commission should revisit its decision. They do not want this debate about raising revenue and closing tax exemptions even if it is tied to a substantial property tax cut. That is further evidence that the best course is to have a public debate about this amendment and let voters decide whether the considerable trade-offs would benefit Florida.