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Time for a Robin Hood tax remedy

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By MARTIN DYCKMAN, Times Associate Editor

© St. Petersburg Times
published March 23, 2003


TALLAHASSEE -- Combine the Senate's proposed budget with what House leaders are saying they'll do and there might be the makings of a decent one. Among scores of major differences, for example, the Senate's will probably be kinder to universities, which Gov. Jeb Bush marked for a big hit. But the Senate plan doesn't restore the medically needy program. On that account, concedes Senate President Jim King, "There might be some people who die."

Unfortunately, the Legislature cannot have both Column A and Column B. It would cost up to $2-billion more than the lawmakers can afford without raising taxes. While the Senate might go for a few hundred million, Speaker Johnnie B. Byrd Jr. remains dead set against so much as a dime.

The House line, like the governor's, is that raising taxes would choke off economic recovery.

In their view, of course, there is never a right time to raise taxes.

But in fact, the right kind of tax increases could be the best medicine for hard times like now. Refusing to raise them could make matters worse.

This is especially true in Florida because nearly three-fourths of the state's general revenue comes from taxes on what people buy. When they earn less, they buy less and the state nets less. Serious budget cuts, which are inevitable if taxes aren't raised, will put a lot more people -- state workers, contractors, suppliers -- out of work. This will make the vicious cycle spin even faster, hurting not just the state budget but the entire economy.

"The dead worst thing you could do, if you really want to wreak havoc in the economy, is to put out of work the people who spend more than they make," says Ed Montanaro, who until recently was the Legislature's chief economist. "And that's exactly what Gov. Bush proposes to do."

Montanaro chose to resign last summer rather than wait to be guillotined by the Jacobins in the emerging House leadership. He had made himself a marked man, first by advising -- unavailingly, of course -- that the state would get more bang for the buck by spending some $262-million on public works rather than on corporate tax cuts, and then by figuring the cost of the class size amendment at far less than the frightful $27.5-billion estimate that the House and the governor preferred.

Montanaro, who now occasionally advises House Democrats, says it would make timely sense to raise the intangibles tax on stocks, bonds and certain other assets, a tax now paid largely by wealthy individuals and businesses. Trouble is, that's the tax that has had the deepest cuts under Bush and the Republican legislative leadership. Any talk of raising it would encounter the familiar "seniors and savers" mantra that was heard again Friday from Byrd.

That's hollow rhetoric, though, given the increased exemptions that take effect for the returns due next January under legislation passed in 2001. The exemptions rise to $250,000 for individuals and $500,000 for couples, so that no "senior or saver" with less than that would pay even a dime.

As retirement and bank accounts are entirely exempt, nobody who can't reasonably afford it will still be paying the tax. Doubling the rate to $2 per $1,000 (the constitutional maximum) would yield nearly $300-million, which happens to be about what it would cost to restore the medically needy program.

"It's a Robin Hood kind of tax increase," says Montanaro, "but that's the economic remedy that makes the most sense." Those paying it would be the "the same people who made out like bandits in the estate tax cuts that President Bush took care of and who Gov. Bush took care of and who would benefit the most from President Bush's tax cuts."

There's also a wide range of services, starting with charter fishing boats ($38-million) that could be taxed without causing hardship to anyone. No tourist is going to pass up a fishing trip over a 6 percent increase, and corporations would write off the skybox levy as just another business expense.

But to hear the House, hell will freeze over before any of this happens.

Byrd denounced the Senate budget as a "cold and calculated political document to try to make the case for raising taxes and going to gambling."

The House is playing games of its own. It will be interesting to see how much smoke and mirrors are in the budget they will reveal this week. After a press release touted an apparently miraculous $321-million teacher pay increase, Byrd and budget Chair Bruce Kyle were either unable or unwilling to say Friday what it would mean for the rest of education.

"There's not much in either budget that both houses agree on," King said Friday.

Hell may not freeze over, but other climatic factors will come to bear. Owing to term limits, not many legislators know what it is like in Tallahassee in June and July. This looks like the year they will learn.

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