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    In tax plan, some see hope, some see doom

    Today, the Senate is expected to approve shifting $4-billion of the sales tax burden to services. House prospects are uncertain.

    By STEVE BOUSQUET, Times Tallahassee Deputy Bureau Chief
    © St. Petersburg Times
    published January 31, 2002


    TALLAHASSEE -- Claude Witt spends his days in happy retirement in New Port Richey, working on his golf game, helping out at Meals on Wheels and hoping the state Legislature overhauls the tax system.

    At 72, Witt says he would gladly pay more taxes, even on his own haircuts, if it would help schools and other public services avoid future cuts.

    "I'm willing to pay if we can get some of these free riders off the exemption list," says Witt, a retired executive at Lykes Corp. "I just got a haircut. Why should I not have to pay sales tax on that? Why should it be exempt?"

    Anne Nymark has an answer.

    Nymark, who employs 11 people at her accounting firm in Brandon, says a new tax on services would be bad for the small businesses that dominate Florida's economy.

    "It's another burden put on small business," Nymark says.

    These two longtime Floridians are on opposite sides of the polarizing debate over whether Florida should shift $4-billion a year in taxes to services while lowering the sales tax from 6 percent to 4.5 percent. Thousands more have called or sent e-mails to local legislators on the issue, some motivated by trade groups or antitax TV ads.

    The tax overhaul is the top priority of Senate President John McKay. The Senate is expected to pass McKay's plan by an overwhelming margin today, but its future in the House is cloudy at best.

    Dozens of services now exempt from taxes, including accounting, legal advice, dry cleaning and pest control, would be subject to sales tax. A final list of exemptions would be approved by the Legislature by 2004.

    McKay, R-Bradenton, says Florida's 1949-era tax system is "out of synch" with a service economy in which most services are tax-free thanks to the political clout of special interests.

    Without immediate tax law changes, McKay says, Florida will face a "$4-billion problem" because sales are shifting from retailers to the Internet and the elimination of the estate tax will reduce revenue.

    McKay wants to put the new 4.5 percent tax rate in the state Constitution, and that means voters must approve it in November. It first needs the approval of at least three-fifths of both the House and Senate.

    Legislators say the most important voices are from people like Nymark and Witt.

    The owner of Professional Accounting & Consulting Service, Nymark, 52, has a pool of clients who are mom-and-pop retailers. Because some of their services would be taxed under McKay's proposal, Nymark worries her clients would be hurt, too.

    Taxing her customers would put more record-keeping demands on her employees, Nymark said. The best thing the Legislature can do to promote the state's economy is to support small businesses in every way possible, she said.

    "Small business firms like mine in the state of Florida provide the vast majority of jobs in this state," Nymark says. "And if you're not careful, it's going to affect unemployment. Because everything trickles down to the employer."

    Nymark urged her senator, Republican Tom Lee, to oppose the tax plan. Lee, however, supports the plan.

    Witt and his wife, Lettie, took the opposite tack in a letter to their senator, Republican Jack Latvala of Palm Harbor.

    "Our state is now 40th in median household income and 33 percent of our residents are living below the poverty level," Witt wrote. "Is this something that our legislators are proud to support?" Latvala is one of the strongest supporters of the plan.

    Witt, a Democrat who says he votes for candidates in both parties, recited the basic math that supports McKay's mission: $17-billion collected in sales taxes, but $23-billion exempt from taxes. He complained in his letter that the tax debate could come to naught because of one man: House Speaker Tom Feeney.

    "Feeney is leading us down this path to fiscal ruin," the Witts wrote. "Does he really have enough power to push this through?"

    Witt wants a new tax system because he says the schools are hurting.

    "They say they want to spend an extra billion for education, when in effect that's zero because they took a billion out last session," Witt says. "All they did was put it back in."

    Passage in the Senate will set the stage for an epic political clash between McKay, the term-limited Senate president, and the House, led by a speaker with ambitions of going off to Capitol Hill. Feeney, R-Oviedo, wants a new congressional district he can win, and McKay is expected to use redistricting as a key bargaining chip in the coming weeks to force a House vote.

    "I need y'all's help to get this done," McKay told a group of visiting civic leaders from Broward County this week. "I'm having a little problem down in the House of Representatives. They don't seem to be warming to the idea. Call every member in the House, and tell them, let the people decide."

    At a glance

    Key provisions of Senate President John McKay's tax proposal:

    The sales tax rate would drop from 6 percent to 4.5 percent, except for rental cars and hotel or apartment rentals of less than 6 months, which would still be taxed at the rate of 6 percent.

    The proposal (SJRB 938) is subject to approval by voters on the November ballot as an amendment to the state Constitution.

    Groceries, health services, prescription drugs and residential rent would remain tax-exempt.

    Most existing tax exemptions would remain, but nearly 100 services that are now exempt from tax would be taxed at the new rate, generating $4.2-billion next year. That list is in another bill (SB 1106), and it is subject to change. It does not become final until 2004.

    A tax on hospital outpatient bills would be repealed.

    -- Source: Florida Senate

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