McKay gives an inch; will tax reform lose a mile?

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© St. Petersburg Times
published January 16, 2002

Dang. What fun is it to be a soldier in John McKay's army if his side keeps trying to surrender before the battle?

McKay, you will recall, is the president of our state Senate. He is the guy who wants to reform Florida's tax structure.

Here was McKay's original deal:

The state sales tax would drop from 6 percent to 4 percent. But a lot of new things would be taxed, including services such as advertising, legal work and accounting.

With a lower tax rate of 4 percent, the typical Florida household and small business would save money, even though more individual things would get taxed.

Naturally, the special interests who have been getting off tax-free did not like McKay's idea. So they banded together for a massive fight, featuring nasty TV and radio commercials designed to make the public angry.

The gist of the commercials was to keep quiet about the benefits of the plan. They focused on individual items that would be taxed, the more outrageous the better. Oh, how the weak, the blind, the elderly would suffer!

Here is the new news. Facing the threat of this air war, McKay and his lieutenants appear to be trying to appease the enemy by agreeing to let some interest groups keep their existing tax breaks.

The watered-down version of the deal was put forth on Monday evening by Ken Pruitt, a senator from Port St. Lucie who is McKay's pick as chairman of the committee that writes the tax laws.

Advertising would keep its tax exemption. More about that in a minute.

So would agriculture. That means ostrich feed would remain tax-exempt in Florida, thank goodness.

So would a long list of other things -- so many that the promised tax cut would be to only 4.5 percent, not as good a deal.

Collectively, what Pruitt's proposal amounts to is an attempt to buy off the most vocal critics, and eliminate the items that were most vulnerable to demagoguery in TV ads.

The new spin in the Senate is that giving back these tax breaks is a way to make the bill stronger and increase its chance of passage. We have to be realistic, the senators say. The senators fancy themselves as clever maneuverers, trying to salvage the bill.

In truth, this crack in the Senate's resolve only increases the resolve of the opponents. The TV stations are not going to break away suddenly from everybody else and say, "Wait, they've paid US off, so the rest of you guys are on your own now."

What's more, there is a question of fundamental fairness here.

Florida's current tax structure is wacky and riddled with loopholes, but at least it is based on a coherent principle -- a tax levied on retail goods.

McKay's original reform idea, too, was based on a coherent principle -- spreading the tax burden over the entire Florida economy, without favor.

But this! This is the setting of tax policy by roulette, based on no principle at all except raw political power. If you have clout in Tallahassee, you get exempted. If you are politically on the outs with the Legislature, as the trial lawyers are, then you get the shaft.

Can you really explain a logical basis for taxing haircuts, but not ostrich feed? Legal work, but not advertising?

Of all the capitulations, the most offensive is a tax break for newspaper, television and radio advertising. The official explanation is that such tax breaks "protect the expression of First Amendment rights."

This is wicked nonsense, meant to cover up the fact that the Senate is afraid of nasty commercials. Making advertising subject to the same tax as the rest of Florida's economy would not be a tax on the First Amendment. It would be a tax of general application, just like Social Security taxes, and corporate income taxes, and sales taxes, and property taxes.

Oh well, water over the dam. It will be interesting to see whether McKay can salvage anything out of this at all, against an indifferent governor and a hostile House. Good news for ostrich farmers. Bad news for Florida.

- You can reach Howard Troxler at (727) 893-8505 or at troxler@sptimes.com.

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