The Senate's proposed tax overhaul has sparked one of the biggest legislative debates in years. Here are the key arguments, excerpted from a letter by Gov. Jeb Bush and a rebuttal by Sen. Ken Pruitt, R-Port St. Lucie:

By Times staff report
© St. Petersburg Times
published February 12, 2002

The Senate's proposed tax overhaul has sparked one of the biggest legislative debates in years. Here are the key arguments, excerpted from a letter by Gov. Jeb Bush and a rebuttal by Sen. Ken Pruitt, R-Port St. Lucie:

Savings to families?

BUSH: The full effects cannot be quantified with much accuracy. (The Senate's economist) estimates that the average Florida family will save $250 annually under the Senate tax plan. . . . (T)his is an estimate of the direct savings and does not account for the increased business taxes that will be passed on in price increases to consumers.

PRUITT: This proposal was designed to improve equity and fairness in a number of ways. First, it saves money for Florida households by an estimated average of $227 per year. . . . Second, the proposal maintains important tax exemptions for such basic household purchases as groceries, residential rent, health care services, residential utilities, and prescription and nonprescription drugs.

Savings to small businesses?

BUSH: These enterprises generally outsource much of their professional service needs because they cannot hire full-time employees to provide these services. They will pay a disproportionate amount of this new tax.

PRUITT: A typical small business with $500,000 in expenses will save $375 per year, mostly as a result of the reduced tax rate on rent, utilities and supplies.

Competition

BUSH: It is argued that current exemptions protect special interests, while Florida households must pay higher taxes -- that a "fair" tax system will spread the tax burden equitably across all segments of society. . . . But one of the reasons economists argue against levying sales taxes on business inputs, as the plan suggests, is that taxes will pyramid upward through the cost structure.

PRUITT: (E)very effort was made to exempt from taxation those transactions that, if taxed, would place certain business groups at a competitive disadvantage. For example, those businesses that are particularly subject to interstate and international competition were exempted: agriculture, manufacturing, research and development, and space-related industries.

Compliance

BUSH: There will be a 34 percent increase in the number of businesses (from 500,000 to 670,000) that will have to register as tax dealers and learn how to collect taxes for the state.

PRUITT: There will be some new points of collection and some increased administration. However, since full implementation will not be until July 1, 2004, there will be more time than usual for the needed education and technology.

Impact on tourists

BUSH: It is clear tourists will pay less, since only some of the goods and activities that tourists buy will continue to be taxed at 6 percent. . . . Floridians will certainly make up the difference.

PRUITT: The proposal maintains the 6 percent tax rate on three of the most important tourist-related purchases: hotel accommodations, rental cars and admissions tickets. Also, many people counted as tourists in Florida are long-term visitors who consume the same goods and services as Florida residents do.

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