Florida is at a crossroads. Growth has stalled, and 300,000 homes sit vacant. A record number of homeowners face foreclosure. One in 13 Floridians is out of work, and one in 10 is receiving food stamps. The state is staring at a $6 billion budget shortfall. Universities have frozen enrollments, teachers are facing pay cuts and public defenders are closing offices some days to save money.
A crisis offers an opportunity for leadership. Gov. Charlie Crist and the Florida Legislature should seize the moment to start creating a fairer, broader tax system. In an ideal world, Florida would create a reasonable personal income tax that would establish a more progressive, stable source of revenue.
It also would scrap the terribly unfair Save Our Homes, which limits property tax increases and benefits longtime homeowners at the expense of businesses, snowbirds and newer homeowners.
But voters aren't likely to approve either change soon — and the governor and state lawmakers are considering more limits on property taxes that would make a bad system worse.
Yet there are realistic options for creating a broader, fairer tax base that reflects a 21st century economy and generates more revenue. Florida will survive this recession. But this state will not flourish, let alone reach its potential, without bold leadership in Tallahassee.
It needs to change.
Five fixes for Florida
ONE: Collect an internet sales tax
A Floridian who buys a book from Amazon.com doesn't pay sales tax, but one who purchases it from a local merchant does. That's unfair. Florida needs to join a 22-state group that has led to greater compliance by Internet retailers with state sales tax laws. Plus, by joining the Streamlined Sales Tax Governing Board, Florida would improve the chances Congress will take up the issue to make such tax collection easier nationwide. Potential revenue: $3 billion.
TWO: Reduce sales tax exemptions
Florida law contains $12.4 billion in tax breaks for specific goods — such as basic groceries and medicines. No one wants to tax food and medicine. But many exemptions don't make sense and should be repealed, such as a break on bottled water and skybox tickets to college athletic events.
Potential revenue: More than $1 billion.
THREE: Tax services
Florida tried this in 1987 only to repeal it months later after caving to criticism. It's time to try again with a more measured approach. It's unfair that homeowners pay a sales tax on bug spray but not when they hire an exterminator; when they buy tax software, but not when they hire an accountant. Services — from lawyers to dry cleaners to accountants — are a growing part of the economy. They should not be exempt from sales taxes. Potential revenue: More than $7 billion.
FOUR: Close corporate loopholes
Florida allows out-of-state corporations to avoid paying state taxes on income from their subsidiaries here. The state should adopt a reporting standard like some two dozen other states and tax a portion of the corporation's profits that can be tied to Florida. Potential revenue: $400 million. A tax-avoidance practice used by wealthy landowners to avoid real estate transfer taxes by creating limited liability companies also should be ended.
Potential revenue: $50 million.
FIVE: Raise cigarette and gasoline taxes, auto tag fees
Cigarette taxes have not increased in nearly 20 years. Nor have auto tag fees during the same period. The gas tax rate has stayed the same, although it is adjusted annually for inflation. A higher cigarette tax could help pay for Medicaid; gas taxes and auto tag fees could go to transit needs.
The combined potential revenue: More than $1 billion.