House plan: A tax vacation
Under the GOP measure, for one week shoppers wouldn't pay sales tax on the first $5,000 of purchases. Democrats have their own plan.
By STEVE BOUSQUET
Published January 13, 2006
TALLAHASSEE - Flush with a budget surplus in an election year, Republican legislators want to turn one week in August into a big-ticket shopping spree by eliminating state sales taxes for the first $5,000 on most items.
The plan announced Thursday, which already has the endorsement of House leaders, would be the biggest single tax cut ever in Florida, worth nearly half a billion dollars.
The Legislature's generosity is possible because a combination of spiking real estate values, population growth and hurricane rebuilding efforts have swelled the state's coffers with more than $3-billion in extra cash.
For one week, Republicans want to lift the statewide sales tax of 6 percent on most items up to $5,000, such as computers, furniture and TVs, as well as the first $5,000 of more expensive items such as cars and boats. The tax break would begin July 31 and end Aug. 6 and would benefit individuals, not businesses.
"We're going to give the people a one-week break from state government," said Rep. Joe Negron, a Republican from Stuart who is sponsoring the proposal.
Negron, the chief budget-writer in the House, is running for attorney general in a crowded Republican primary on Sept. 5, a month after the tax cut would expire. Though he's eager to raise his statewide profile, Negron dismissed questions about the tax cut's timing, and said it is consistency from the Republican majority.
"We ran on a platform of lower taxes," Negron said. "We're just keeping our word."
The projected revenue loss of $460-million is less than 1 percent of the overall state budget, and is roughly equivalent to what the state contributes to local school districts to help pay the cost of transporting Florida's 2.6-million public school students.
Talk of tax cuts in Tallahassee usually stirs new debate over spending priorities, and whether more money should be spent on raising teacher salaries, paying for the class size amendment, building new roads or reducing the state's debt.
But lawmakers consider it fiscally risky to spend one-time money such as this year's windfall on programs that need money year after year, such as public schools or health care. The fear is that using a one-time windfall to fund a permanent program could create future budget shortfalls when revenues are lean.
Even as House Democrats called the Republicans' tax cut a "gimmick," they offered a counterproposal, of a $100 check to every Florida family that takes a $25,000 homestead exemption. The total cost for the Democrats' plan would be about $430-million.
They said the recent growth in the tax burden has fallen hardest on homeowners, who are paying higher property taxes, mostly for public schools. Those homeowners also are struggling with ever-increasing electric bills and insurance premiums.
"Think about who in our community is under the gun right now. Who's feeling the squeeze?" said Rep. Dan Gelber, D-Miami Beach. "We could give every single homeowner in the state of Florida a check from Florida for $100. ... This is the right thing to do."
Those who do not own their homes, such as apartment and mobile-home dwellers, would not be eligible.
As they portrayed themselves as allies of the middle class, Democrats posed for cameras holding an oversized check, signed by "your House Democratic legislators."
Gov. Jeb Bush's spokesman said he favors further tax cuts.
"He certainly believes a portion of the surplus should go back into the pockets of taxpayers," spokesman Russell Schweiss said. "We haven't reviewed either proposal."
Republicans, who have cut taxes by $14-billion since Bush took office in 1999, are weighing other tax cuts in 2006. They include wiping out the final piece of the intangibles tax on stocks, bonds and notes, and repeating the sales tax holiday on items needed for the next hurricane season.
Their latest tax-cut proposal would benefit tourists as well as Florida residents, because tourists contribute as much as a third of sales tax receipts.
House Republicans said that's their goal because tourists are such huge contributors to Florida's economy. Another factor, they said, is that people in adjacent states might be attracted to Florida to make big purchases.
The House tax-cut proposal would likely take the place of the popular sales tax holiday on most back-to-school purchases of $50 or less, but no decision has been made yet on the future of the back-to-school holiday. The revenue loss from last year's holiday was $37-million.
Negron's bill (HB 691) has the support of House Speaker Allan Bense, R-Panama City, and others in the leadership, meaning it already is an overwhelming favorite to pass the House, where the GOP holds an 85-35 majority.
Under Negron's proposal, rental car surcharges, vending machine sales, private club and membership dues, service warranties and county food and beverage taxes would be taxable. Local sales taxes also would still be collected.
But a half-billion dollar tax cut, even in an election year, could find resistance in the Senate, where Senate President Tom Lee, R-Valrico, wants more long-range budget planning and stockpiling of extra cash in anticipation of a future economic downturn.
The Senate president, a candidate for chief financial officer, said tax relief should be part of a broader fiscal strategy for Florida.
"If we can do tax relief, invest in Florida and save some money, I think that's the best public policy for Florida, long-term," Lee said. "They're all in the mix right now."
Last year, Lee insisted on trimming the governor's tax cut package by nearly half, to about $225-million.
Times staff writer Joni James contributed to this report.