Senate President John McKay's ambitious crusade to modernize Florida's tax system became a lot clearer Wednesday. The obstacles in his path became clearer, too.
McKay wants to put tax reform before voters in November 2002 as an amendment to the state Constitution. The Bradenton Republican wants to reduce the sales tax rate from 6 percent to 4 percent and end sales tax exemptions that he says "don't make any sense" and were created to benefit narrow business interests.
Florida's sales tax exemptions are worth $23-billion a year, $6-billion more than what the state collected in sales taxes last year. In the 2000 session alone, lawmakers voted to add exemptions for cell phone towers, prepaid phone cards, fill dirt, motion picture video equipment, boiler fuels, people-mover systems and railroad bed materials.
McKay made his pitch by telephone to the state Tax Reform Task Force, saying the need for tax reform is urgent because of what he calls "the $4-billion problem." That's his estimate of the state's revenue loss from two big areas: retail sales shifting to the largely untaxed Internet and the elimination of the federal estate tax.
"We need to repair the tax system before the $4-billion train hits us right between the eyes, or else we'll be restructuring our tax system in the midst of chaos," McKay said.
McKay calls his plan "revenue neutral," meaning it does not increase taxes, but that only applies to the first three years. McKay's goal is to broaden the taxable base so that in the future, growing segments of the economy such as professional services will generate money to run the state.
Under his plan, existing exemptions for groceries, rent, prescription drugs and health care would continue and any new taxes _ and tax breaks _ would have to pass both houses of the Legislature by a three-fifths vote.
McKay has been crisscrossing Florida, honing his message to groups interested in the state's fiscal future. Last week, it was the Council of 100, a business roundtable, and today's audience is the Florida League of Cities in Orlando.
But McKay is in for a rude awakening, if the public reaction is similar to what he heard Wednesday from the business-friendly Tax Reform Task Force, whose members were appointed by past legislative leaders who had little enthusiasm for tax reform.
Before McKay spoke to the group by phone, members heard a vigorous defense of agricultural tax breaks for feed, seed, fertilizer and pesticides. Florida Farm Bureau president Carl Loop called it "inequitable and illogical" to, in effect, add to the tax burden on Florida's 40,000 farmers during hard times.
Bob Williams, the task force vice chairman and a corporate lobbyist, blasted McKay's plan as a "substantial tax increase for a substantial number of businesses," including his own employer, Smurfit-Stone, a large pulp paper packaging firm.
Two task force members, Rep. Rob Wallace, R-Tampa, and Panama City contractor Charlie Hilton, are pushing their own constitutional amendment, tying annual state spending increases to a formula combining the growth in population and inflation as a way to hold down the annual growth in the budget. They also want to require any new taxes by counties, school boards and cities to be by a "super-majority" vote, such as five members of a seven-member body.
To get on the ballot, a constitutional amendment requires a three-fifths vote by each house of the Legislature, or at least 24 of 40 senators and 72 of 120 House members. But a governor is powerless to veto a proposed constitutional amendment.