TCPalm Editorial: Tax reform, yes; tax increase, no

Thursday, March 6, 2008


Imposing a one-cent hike in Florida’s sales tax would make tough economic times even worse

Call it penny-ante tax relief.

The latest plan at the state Taxation and Budget Reform Commission calls for a one-cent increase in Florida’s sales tax. In exchange, the panel pledges to close selected loopholes in the current tax code and deliver new breaks to property owners.

Can you say “bait and switch”?

This newspaper has long supported the concept of closing some statutory loopholes that, inexplicably, give tax-free status to hundreds of items ranging from pricey stadium skyboxes to ostrich feed. By capturing more revenues, the state should be able to lower the overall sales-tax rate, not raise it. That’s the essence of true tax reform.

But the tax reform commission blurs its priorities by piling on property-tax breaks for selected homeowners in an attempt to offset what amounts to a $3.5 billion sales-tax hike.

One provision would lower the newly voter-approved 10 percent annual assessment cap on non-homesteaded properties to 5 percent. That reduction surely sweetens the pot for snowbirds, but it’s no deal for 18 million Floridians.

This kind of tradeoff doesn’t impress state Sen. Mike Haridopolos, who chairs the Senate Tax and Finance Committee and was instrumental in producing the Amendment 1 reforms that passed in January.

“It’s too easy to start backdooring tax increases, with property taxes creeping up again,” the Melbourne Republican told Scripps Treasure Coast Newspapers’ editorial board last week.

Indeed, the temptation to ratchet up taxes will be almost immediate. To sell the sales tax-property tax combo, Orlando economist Hank Fishkind calculated that the “average taxpayer” would come out $53 ahead under the proposal.

Really? Fifty-three whole dollars? For that kind of benefit, why go through these gyrations at all?

If Fishkind’s computations are correct, the sales-tax hike fails to generate appreciably more revenue, but a 17 percent increase in the base rate would hit low- and middle-income taxpayers disproportionately hard. In other words, the worst of both worlds.

Instead of pursuing a shell game that collapses at the bottom line, commissioners would do better to focus on another program already under review: the Taxpayer Bill of Rights. The so-called TABOR would cap how much cities, counties, schools and special taxing districts can spend by tying revenues to inflation and population increases. Only voters could waive the spending or revenue caps, and any new tax or fee also would have to get public approval.

Floridians deserve one clear, well-considered and equitable tax package from the reform commission, which has the authority to put recommendations directly onto the November ballot. As such, the panel must resist the temptation to haul out a smorgasbord of competing, even conflicting, schemes. A tax increase definitely should not be on the menu.

If the protections of a Taxpayer Bill of Rights were in place, Florida households would have enjoyed an average property-tax savings of $569 in 2006. That’s at least 10 times better than a market-killing hike in the sales tax.

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Reprinted from the TCPalm