State: Tax overhaul plan greeted with silence

No business organization complains louder about the state's many shortcomings than the Florida Chamber of Commerce. Its most recent list of failings includes poorly educated workers, congested roads and a surge in low-paying jobs.

Yet the chamber is conspicuously quiet on one subject: A referendum on overhauling the tax system being pushed by Senate President John McKay.

McKay says Florida's reliance on the sales tax, which dates to 1949, is a crude anachronism in a modern megastate and incapable of meeting the state's long-term needs. The costliest of those needs is education -- the issue the chamber says has been neglected too long.

Chamber leaders say they hope to formulate a position on McKay's plan by Feb. 6. But by then, McKay probably will have brought it to a Senate vote.

"Something this important warrants a substantive, face-to-face discussion," says Paul Ledford, the chamber's executive vice president. That's true, he says, even if the delay makes the position irrelevant.

So goes Florida's curious debate over taxes, where Republicans are fighting hardest for change while many advocates for increased state spending are sitting quietly on the sidelines.

"I think John McKay is brave, and I think he's well-intended," says state Rep. Lois Frankel, the House minority leader and one of four Democratic candidates for governor.

But like her opponents -- all of whom are calling for more money for education -- she has not endorsed his plan nor offered one of her own.

Frankel has plenty of company.

Democratic senators such as Les Miller of Tampa, Kendrick Meek of Miami, Ron Klein of Delray Beach and Skip Campbell of Coral Springs -- all self-proclaimed champions of education -- are not taking a position on McKays's proposal.

"I'm still talking to people," says Miller, who says he needs more input from his constituents.

The Council of 100, a group of business leaders whose stated mission is to improve Florida's economic well-being, is planted firmly on the fence. So is the Florida Home Builders Association, a group that talks a lot about good schools because they make it easier to sell homes.

Florida Education Secretary Jim Horne called for a tax overhaul two years ago when he was a Republican state senator. Now he is in charge of Florida's schools, which rank near the bottom of the nation in per-student funding.

When asked whether he would play a role in the tax debate, Horne said, "Not unless asked. I have my hands full."

All of this is driving state Sen. Ken Pruitt crazy.

Pruitt, a real estate broker and well contractor from Port St. Lucie, is one of McKay's chief lieutenants in the tax fight. He and the Senate president have always been viewed as rock-ribbed, pro-business conservatives.

Now they are being attacked as ideological apostates by traditional Republican constituencies. These include cattlemen, accountants, real estate agents and TV station owners, all of whom are helping to finance an advertising campaign intended to derail McKay's plan.

Pruitt thought he could at least count on the Chamber of Commerce, whose research arm produced a study two months ago that decried the state's under-investment in schools, transportation and overall "quality of life."

Those findings closely tracked a report published earlier in the St. Petersburg Times that showed Florida lost ground to other states during the 1990s in almost every category that matters.

Florida fell from 24th to 38th in per student spending. It dropped from 33rd to 40th in median household income. In 1990, this state had the nation's highest crime rate. Ten years later, it had improved just one notch to 49th.

"The question is, "What do you stand for?' " says Pruitt, who is chairman of the Senate Finance and Taxation Committee.

"What does the Chamber of Commerce stand for? ... They talk a lot about what they want for Florida, but you can't keep going down this slippery slope and think you're going to survive."

Risky business

Florida's last real debate over tax reform occurred 15 years ago. It ended in a hail of recriminations and was disastrous for many of the politicians who pushed hardest for change.

Gov. Bob Martinez, who proposed a tax on services and then reversed course when it proved unpopular, lost his bid for re-election. Other supporters also were defeated, including then-House Speaker Jon Mills, who ran for Congress in 1988.

Though many of today's legislators were not in office then, they are well aware that supporting major changes to the state's tax system is fraught with risk; opponents have little trouble twisting "tax reform" into "tax increase."

But their political problems don't lessen the stakes for Florida.

Because the state has no personal income tax, it gets most of its revenue from a tax on sales. That has a disproportionate impact on poor people because they must spend a higher percentage of their income.

Over the past 50 years, state lawmakers have protected hundreds of special interests by knitting together a crazy-quilt of exemptions. At least 92 were approved during the 1990s alone -- a major reason the state now exempts considerably more revenue than it taxes.

McKay wants to let voters decide in November whether to amend the state Constitution by lowering the sales tax, which is applied mainly to non-essential consumer items. It would drop from 6 percent to 4.5 percent.

To balance the revenue loss, he would end many of the tax exemptions on services, such as those provided by lawyers and accountants.

Without such a change, McKay says, Florida will face a huge budget crisis in the years ahead.

Opponents say the overhaul would shift much of the state's tax burden from tourists to residents. They have attacked it with an advertising campaign they vow to continue until the plan is dead.

In recent days, McKay has tried to appease his opponents by offering to retain their exemptions. The strategy hasn't worked.

It has, however, provided cover to many of the advocacy and business groups sitting out the fight.

"We're still waiting to see the final version. Without that, we can't take a position," says Ian Smith, a spokesmen for the home builders.

"We're an organization with people from all over the state and from every business sector," says Charles Ohlinger III, executive director of the Council of 100. "It takes time to reach a consensus."

They may not have much time. McKay is expected to bring his plan up for a quick vote in the Senate, perhaps by the end of January.

That would be six months after he first sought the support of the Chamber of Commerce.

Ledford, the chamber's executive vice president, says his group tried several times to get more information about the plan. "But every effort we made to hook up with them was canceled," he says.

It didn't help that the plan was officially unveiled in the middle of December. "That's not a time we're doing a lot of business," Ledford says.

He says the chamber will make a recommendation. If it comes too late to make a difference, he says, "it's not a big concern."

Some groups have a simple reason for withholding support: It's in their best interest.

The Florida Association of Realtors is one of the state's best-organized lobbies. It represents about 75,000 real estate agents, most of whom are in offices of four employees or fewer. In every Senate and House district in the state, Realtors can be counted on to pitch in with campaign contributions and other help.

Realtor lobbyist Gene Adams says his group is not philosophically opposed to tax reform. But he says McKay's proposal is "not in the Realtors' playbook" because it would cost his members money.

As any real estate agent will admit, housing values are closely tied to the quality of neighborhood schools. And McKay's plan is aimed at securing a more reliable source of money -- one that would grow over time -- to pay for a rapidly growing student population.

Adams said Realtors would rather see county school boards get the power to raise the sales tax by a penny in their counties, with the proceeds used exclusively for infrastructure improvements.

That proposal has been floated for at least the past 10 years.

Current law requires such a tax increase to be submitted to a voter referendum. Hillsborough and Broward counties, both of which suffer from school crowding, are among the counties who gave it a try.

Both suffered major defeats.

Waning influence

Not all of the traditional advocacy groups are sitting on their hands. The AARP is backing McKay's plan. So are the Florida School Boards Association and the Florida Education Association, the state teachers union.

But this debate is clearly being driven by politics.

Senate Democratic leader Tom Rossin of Royal Palm Beach strongly supports McKay's proposal. But even he questions the wisdom of floating it now, in the final year of McKay's two-year term as president, when his influence is waning and many legislators are more preoccupied with reapportionment.

McKay controls the Senate's agenda, and he almost certainly will get the 24 votes he needs to get his plan out of the Senate. But that's only half the battle. The real fight will be in the more conservative House.

McKay will face resistance there from both parties.

Conservative Democrats are worried about what they see as a possible new tax on small businesses in their districts. Liberal Democrats want to tie McKay's proposal to some guaranteed system of improving education.

"This has to be about whether we're finally going to step up to the plate and fund our education system in Florida," says Frankel, the House minority leader. "I don't think the public cares at all about tax reform if they're not going to benefit from it in some way."

But Rep. Doug Wiles, D-St. Augustine, who is in line to become Democratic leader after the November elections, is less enthusiastic.

"I've talked to a lot of caucus members, and there doesn't seem to be a great desire to embrace McKay's plan," Wiles says. "The view is that it may not be the right time to start a major overhaul of our tax system, given the current state of our economy."

Wiles does not see a contradiction between House Democrats' long-running push to spend more money on education and a reluctance to consider McKay's tax proposal.

The reason, he says, is that lawmakers have repeatedly heard McKay describe his proposal as "revenue neutral."

That means there is no assurance there will actually be more money, he says.

-- Staff writer Stephen Hegarty contributed to this report.

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