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Fiscal crunch: Blame the sales tax

Published October 6, 2003

From an economist's standpoint, the state of Florida's budget woes can be explained by two words: sales tax.

Or rather, the lack thereof.

In an analysis last week, Wachovia economist Mark Vitner pointed out two sets of statistics to break down Florida's fiscal crunch.

First, sales tax collections have been lagging, climbing just 2.4 percent in this fiscal year after minuscule gains just over 1 percent the past two years.

Second, the drop comes as Florida is depending on sales tax revenues more than ever. Sales tax receipts accounted for 73.2 percent of general fund revenues in 2002, up from 70 percent a decade earlier.

Not surprisingly, Vitner pins the tax shortfall directly on tourism.

Even though Florida tourism has rebounded above pre-9/11 levels, "the mix today is far less favorable," he said. More visitors are arriving by car and fewer by air. Those not flying include many visitors from abroad who typically account for a disproportionate share of tourism spending, adding to sales tax coffers.

"Given the weakness in tax collections, it is not surprising Florida's legislature had so much difficulty reaching a budget deal," he said.

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