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'Tax cut,' a term that's still evolving

Florida's big budget surplus was originally supposed to mean money back for residents. But semantics may be getting in the way.

By JONI JAMES
Published April 30, 2006

TALLAHASSEE - Three months ago, Florida Gov. Jeb Bush couldn't be clearer. A record amount of surplus cash warranted a record in tax cuts: $1.5-billion.

There was so much money, Bush, at a January news conference, even reached across the partisan divide to embrace an idea touted by Democrats to send a $100 rebate to each Florida homeowner. Bush's plan came shortly after House Republicans announced they wanted to grant a giant sales tax holiday for up to $5,000 in retail goods.

When state economists revised their estimates upward earlier this month, saying lawmakers had more than $4-billion in surplus, such tax ideas should have gotten even easier.

And yet, with the session in its final week and all the major budget issues resolved for 2006-07, Bush and his allies are settling for one of the smallest tax cut packages since Bush took office: About $300-million.

It's a striking truth for a Republican governor and GOP lawmakers who have taken pride in claiming they have saved taxpayers $14.5-billion over the past seven years.

This year's total is significantly lower than the $1-billion Bush passed in his first year in office, as well as the $461-million approved last year.

More than half of this year's tax break total, about $160-million, is dedicated to the final repeal of the intangibles tax paid by individuals with investments and savings other than retirement accounts of more than $250,000, or $500,000 for couples. Last week, Bush signed it, along with a $34-million, 12-day sales tax break for hurricane supplies that starts May 21.

So what gives in a year when Florida's budget will swell to $71-billion?

Two punishing years of hurricanes, combined with a growing sense of fiscal uncertainty about Florida's future and a priority to fund education, have left little room for tax relief.

Leaders in the Legislature are expected to set aside at least $1-billion because a three-year outlook suggests that coming years might not be so rosy. And Senate budget chief Lisa Carlton, R-Osprey, argued that much higher tax breaks would be unwise, given that much of the surplus is one-time revenue that wouldn't be available next year to sustain any recurring tax cuts.

Carlton and Senate President Tom Lee, R-Valrico, have taken the position it is wiser to spend such dollars on fixed costs like school construction.

Extra money has been gobbled up by new priorities, including the state's property insurance crisis after eight hurricanes in two years and the highest increase in K-12 funding in more than a decade.

As a result, the political lexicon is changing, too. Here's the new definition of a tax cut: paying down the deficit that has been racked up by hurricane-ravaged Citizens Property Insurance Corp. The state-run insurance company that writes policies for those who cannot find coverage on the open market is $1.7-billion in the red.

State law requires Citizens to assess all Florida property owners to replenish company accounts. Those assessments will be lower because House and Senate budget negotiators are debating spending between $750-million and $920-million next year to help ease the Citizens deficit.

"It's not pure tax relief, but it's close," Carlton said.

Eating up much of the remaining surplus: An additional $1.7-billion is earmarked for an 8.6 percent hike in per-student funding for public schools. Plus, legislators plan to spend between $50-million and $500-million to provide subsidized loans for homeowners to mitigate against hurricane damage and $1.1-billion for school construction.

In the wake of such decisions, Bush's earlier $1.5-billion tax relief plan, which also included a failed $560-million rollback in the state's property tax millage rate, has fallen by the wayside.

But Bush made no apologies last week, saying the Citizens bailout was a suitable replacement.

"To provide support to (property insurance) policyholders in the form of a rebate is a tax cut," Bush said. "You can call it whatever you want. I don't really care."

That wasn't Bush's position just a few months ago, when he and other Republicans initially resisted bailing out Citizens, saying it would amount to a subsidy for a broken insurance company - not a tax break. It was the same position they took last year when they rejected the suggestion of fellow Republican Tom Gallagher, the state's chief financial officer and a gubernatorial candidate, to pay down the $520-million assessment that was put to Floridians after the 2004 hurricanes.

But Bush and Lee changed their position in recent weeks, saying property insurance overhaul plans working through the House and Senate had convinced them that the state's insurance market is headed for reform and the bailout was warranted.

House Speaker Allan Bense, R-Panama City, boasted last week that the Citizens bailout will bring the state's tax break total to more than $1-billion. "That's a reasonable day's work," Bense said.

House Democrats have seized on the change in semantics to argue Floridians are now facing a huge tax increase because of the Citizens assessments, even if they are reduced some by the state's bailout.

"Florida Republicans reversed course . . . finally admitting that increased assessments, fees and fines are indeed the same as tax increases," the minority House party boasted in a news release.

Others have been similarly critical of a Republican-backed plan to allow local governments to add a surcharge of $2 per car, per day for rental cars to fund roads.

Senate Minority Leader Les Miller, D-Tampa, said not much is gained in the semantic debate. "Whatever we can do to keep the assessment down is good," Miller said. "But its not going to be enough unless we can do something about the enormous increases in rates."

Other tax breaks expected to pass for 2006-07: sales tax holidays for back-to-school supplies; industry-specific tax cuts for the space industry and on agriculture and research equipment. Also still under consideration is a repeal of the state's liquor-by-the-drink tax and a new property tax break for a biblical theme park in Orlando.

Joni James can be reached at jjames@sptimes.com or 850 224-7263.

[Last modified April 30, 2006, 01:36:20]