Florida lawmakers are finally taking a hard look at sales tax exemptions, which have long symbolized the undue influence of special interests in Tallahassee. But the true show of lawmakers' mettle depends on more than lip service.
Starting today in a committee in the antitax House, Republican leaders have a chance to demonstrate they are committed to addressing Florida's fiscal crisis, not just appeasing various lobbyists for big campaign contributors. Members of the House Finance and Tax Committee need to initiate the repeal of some exemptions to signal they're serious about making Florida's tax base fairer and broader. To its credit, the Senate has signaled its willingness to examine Florida's tax structure with the state facing a deficit for 2009-10 that has risen to $6.7 billion. Senate leaders have promised to cut exemptions, push for collecting sales tax on Internet sales and improve tax collection enforcement. But they need a partner. The House should take that first step today.
So many exemptions litter state law, Florida actually exempts more goods and services from the sales tax than the $22 billion it collects. Many are understandable. No one has suggested, for example, that the state should remove exemptions for groceries, medicine or residential rent.
But some exemptions — many of which were added in the past two decades — are the result of powerful lobbying in the Capitol's halls. They make little sense in a state where the sales tax is the primary means to pay for the operation of such essentials as schools, prisons and child protective services. Every exemption narrows the state's tax base, making it more susceptible to economic downturn and increasing pressure to raise the tax rate.
Consider, for example, the 1998 tax exemption on charter fishing boat trips that state economists estimate costs the state $71.3 million annually. Boat captains told lawmakers earlier this month that a sales tax would raise their prices — which can top $1,000 — in an era when high fuel costs have already made their excursions more expensive. They warned it could deter customers, many of whom are from out-of-state, from renting a boat and further hurt the economy. But how many customers with the means to drop $1,000 on a boat trip will decide not to because of a $60 sales tax? That interest cannot be more important than the state's interest in funding needed programs.
The same questions could be applied to a 1999 exemption for renting skyboxes at high school and college sporting events; a 1974 exemption on U.S. and state flag purchases; and various breaks on dry cleaning, pet boarding and photo finishing.
Florida TaxWatch, the business-backed tax policy organization, last week listed more than $560 million in exemptions it considers ripe for review. House members, who have spent weeks hearing testimony from dozens of special interests, could start with that list today and then dig deeper. They need to consider the entire state's interests, not just the interests of a few. They need to start making the tough decisions for Florida's future.