TaxWatch questions $1.3-billion in tax exemptions

TALLAHASSEE -- Florida lawmakers should consider eliminating more than $1-billion in sales tax exemptions, Florida TaxWatch said Monday.

"I want to make clear TaxWatch is not recommending any tax increases," TaxWatch president Dominic Calabro said.

But the Legislature should review tax exemptions that don't stimulate the economy or shelter the basics of life, the group said. Its committees of business executives found more than 100 exemptions worth nearly $1.3-billion that may not be warranted.

House Speaker Johnnie Byrd and Gov. Jeb Bush weren't buying it. "The bottom line is we need to not take any more money out of the private sector and put it in the public sector," Byrd said.

Byrd, R-Plant City, has steadfastly opposed suggestions for finding new money as lawmakers work to write a balanced budget that pays for more students, higher health care costs and voter demand for smaller class sizes.

"The whole point is if you cut taxes that stimulates the economy," Byrd said.

Bush said in Miami that he would equate repealing tax exemptions with a tax hike.

"In my world, that should be the very, very, very, very last option," Bush said.

Sarah Bascom, a spokeswoman for Senate President Jim King, R-Jacksonville, said he has long said he supported reviewing exemptions on a case-by-case basis but would not be open to a wholesale review.

Calabro said TaxWatch also thought lawmakers should first take steps to cut costs, such as reducing expenses for state agencies, expanding a tax credit program for businesses that donate to scholarship funds for poor children, and requiring school districts to seek bids for transportation, food service and maintenance.

The TaxWatch report also said the state should do more to collect federal grants, estimating that the state is eligible for another $900-million.

A debate over sales tax exemptions dominated the legislative session last year. The Legislature ultimately agreed to put before voters a measure that would create a special committee to review and repeal exemptions. But TaxWatch and several other business groups successfully challenged the constitutionality of the measure and it was never voted on.

More than 300 items are not subject to Florida's 6-cent sales tax, which is the revenue workhorse for the state.

The sales tax generates about $17-billion a year. The exemptions and exclusions are estimated to total $23-billion.

Since the tax system is designed to tax items only once, many materials used by businesses are exempt. The sales tax also has never been imposed on the basics of life, such as groceries, rent and medical care. And the Legislature has granted exemptions to industries to promote economic development. Many agricultural items, such as seed, feed and fertilizer, are also exempt.

"The vast majority of sales tax exemptions -- in terms of dollars -- are fully justified," the TaxWatch report concludes.

TaxWatch recommended that exemptions that are integral to the design of the tax system as a one-level tax on the final consumer be retained. Exemptions on life necessities and those that stimulate the economy should also be retained.

But TaxWatch said that exemptions that don't fall "squarely" within one of those three categories should be periodically reviewed by lawmakers.

Some of the items that made its list as potentially repealable: dry-cleaning and laundry services, $78-million; beauty and barber shop services, $65-million; cleaning and pest control services, $56-million; entertainment and sports services, $219-million; subsidies for sports teams, the Golf Hall of Fame and the International Game Fish Association World Center, $20-million; and bottled water, $9-million.

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