State: Senate okay sets up tax fight

TALLAHASSEE -- The Republican-controlled Senate on Thursday approved the biggest changes in Florida's tax system in 15 years, setting up a clash with a House that's openly hostile to tinkering with tax policy.

Senate President John McKay's bold and controversial plan asks voters to lower the sales tax rate from 6 percent to 4.5 percent and make up $4.2-billion in lost revenue with taxes on many services that are now tax-free. Not since 1987, the year of the politically disastrous services tax, has such a proposal gone this far.

McKay's single-minded determination to get his plan before voters in November now threatens to bring the rest of the session to a standstill, including the budget and the once-a-decade task of redrawing districts. McKay may have no choice but to hold the entire House agenda hostage until his tax reform nemesis, Speaker Tom Feeney, takes up his tax plan.

Before the Senate voted, Feeney seemed to be spoiling for a fight, calling it "a sad week in the Senate." Feeney accused McKay of using threats and strong-arm tactics to get the votes he needed.

"We've heard a lot of bad things have been happening over there behind closed doors," Feeney said. "There are a lot of members who have not been free to vote their conscience."

McKay denied threatening anyone. "If he asserts that somebody's been forced, tell me who it is," McKay said. "If somebody can prove it, I'll eat crow."

After a lot of quiet behind-the-scenes cajoling, McKay persuaded 30 senators to embrace his vision of a services tax. But he can't get Feeney or Gov. Jeb Bush to agree. Bush contradicted his fellow Republicans in the Senate, saying, "There is no evidence that our current tax structure is dysfunctional."

Senators told a different story. One by one, they blasted a tax system they blamed for jammed classrooms and a flimsy safety net for the poor and elderly. They described a Florida different from the one Bush says has made strides forward since he took office.

"We can't pay our own bills," said Sen. Lisa Carlton, a Sarasota Republican in charge of putting together a new budget. She ticked off a list of services doomed to deeper cuts, from drug treatment and crime prevention to libraries and fine arts.

"All the good things are jeopardized," said Sen. Don Sullivan, R-Seminole, the chief of education spending in the Senate. Unless the tax system is changed to include the faster-growing service sector, Sullivan said, things will only get worse.

Sen. Jim King, R-Jacksonville, said one hospital in his city will soon go bankrupt "because we don't have the funds to bail them out."

On one hand, senators describe McKay's plan as "revenue neutral," but that's only in the first year. The same Republican senators who voted for tax cuts three years in a row now say tax changes are needed because the state doesn't have enough revenue.

It was an emotional day on the Senate floor.

His voice quavering at times, Sen. Jack Latvala, R-Palm Harbor, said that when he and his colleagues leave office, "The question will be, did we make a difference? Did we save lives when we had a chance to do it? ... If not now, when? If not this, what? If not us, who?"

Before the 31-9 vote, senators preserved exemptions for several services: haircuts, shipping of wood pulp for paper mills and materials shipped by rail. Those exemptions are worth $95-million a year. Then they passed a separate bill containing the list of services being taxed by a 32-8 vote.

While senators spoke, a TV crew in the gallery captured it all on tape, but not for the 6 o'clock news. The Florida Association of Broadcasters, which has led the opposition against McKay, hired a TV crew to tape the speeches.

"It's good to document everything in case future legislators need to go back and look at what's been done," said the group's president, Pat Roberts.

Critics say McKay's plan is bad for business because it will usher in two years of uncertainty while legislatures add or take away exemptions for services sure to be well-represented by lobbyists.

Lobbyist J.M. "Mac" Stipanovich, a strategist for opponents, predicted the 31 Senate votes will prove to be "the high-water mark" for a plan he says will grow more unpopular as more Floridians understand it. "Tax referendums seldom improve with age," he said.

Soon after the Senate vote, the Florida Association of Broadcasters previewed its newest 30-second attack ad, calling the tax plan a bureaucratic nightmare for small business owners while urging viewers to flood the House with calls of protest. Eighteen of 25 Senate Republicans and all but two Democrats voted for McKay's plan.

Two senators from West Central Florida voted no: Republicans Anna Cowin of Leesburg and Victor Crist of Tampa.

Crist said tax reform "needs cautious and deliberative debate." He also is uneasy about putting tax policy in the Constitution, saying it would restrict the ability of future state legislators.

Only one opponent, Democrat Ron Klein of Delray Beach, spoke during two hours of debate. Several others ducked for cover after the Senate adjourned for the day.

Democrat Daryl Jones of Miami, who is running for governor, said the debate changed his mind. Jones voted no in a Senate committee, but switched to yes Thursday.

-- Times staff writers Lucy Morgan and Alisa Ulferts contributed to this report.

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