Florida politicians should be embarrassed by a tax system that is even more unfair than the one Alabama's governor is determined to reform.
Published June 16, 2003
Alabama, long notorious for one of the nation's most unfair tax systems, has a new governor, Bob Riley, who's fighting to fix that. Significant reform would accompany the $1.2-billion overall increase that he's asking voters to approve.
Persuading his Legislature to put it on the ballot was the easier part. "Anyone who doubts the courage of this initiative," wrote David Lanoue, chairman of political science at the University of Alabama, for the Mobile Register, "has not been listening to Riley being pilloried on talk radio stations from one end of Alabama to the other."
But if Riley - who regards fair taxation as a religious imperative - fails in the effort, he and his supporters can take comfort in one fact: As bad as Alabama may be, neighboring Florida is worse.
That's right, worse.
The poorest 20 percent of non-elderly Floridians, those with incomes under $15,000, pay the state and local governments $14.40 of every $100 they earn. In Alabama, the equivalent poorest 20 percent pay $10.60 out of every $100.
In both states (as in most states), wealthier people fare better. The more they earn, the smaller the percentage they pay in taxes. Economists call that regressive. It's in that respect that Florida compares most shamefully to even Alabama.
Florida taxes its poorest people nearly five times as hard as the very wealthiest (those whose incomes average $946,000) and more than twice as hard as the upper middle class. In Alabama, contrastingly, the bottom-to-top ratio is just over two to one.
These statistics were compiled by the Institute on Taxation and Economic Policy, a Washington-based public interest organization, which rates the 10 most regressive state tax systems according to the differences between tax burdens on the poorest and richest citizens. The 10, in descending order of unfairness, are Washington, Florida, Tennessee, South Dakota, Texas, Illinois, Michigan, Pennsylvania, Nevada and Alabama.
Unlike Florida, Alabama has an income tax. It's essentially flat; Riley's reforms would make it progressive.
Efforts to do the same with Florida's highly regressive sales tax have been few and spectacularly unsuccessful because of organized resistance to applying the tax to services. Senate President John McKay's proposal last year to eliminate many exemptions and reduce the sales tax rate was dead on arrival in the House, where Johnnie Byrd, the present speaker, played the role of chief executioner. Gov. Jeb Bush had no use for it either.
The 1987 Legislature did vote to tax many services in response to a strong plea from Gov. Bob Martinez - a Republican, like Byrd, Bush, McKay and Riley. Martinez's address to a joint session is remembered for a short but brilliant summary of the issue:
"The fastest growing sector of our economy is personal services, not sales of goods. If revenues are to keep pace with growth over the long term, then we must extend the sales tax to services. The demand for services is much less subject to fluctuations in the economy than the demand for goods. If revenues are to be stabilized in the face of economic downturns over the long term, then we must extend the sales tax to services. Purchasers of services are more affluent as a group than the population as a whole. If we are to make our tax system more fair over the long term, then we must extend the sales to services. This is what my budget recommends, and that is what the future demands. . . ."
The tax on services was repealed before it went into effect because of intense opposition from the advertising industry (including most of the news media), real estate brokers and other service-sector lobbies. Martinez and the Legislature then agreed on a penny increase in the sales tax rate, which made it more regressive.
Under Bush, the Legislature has all but repealed the intangibles tax, Florida's only levy on wealth. The stage is being set for a seventh cent of sales tax, with which Florida would probably displace Washington as the worst of the worst.
