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Can a sales tax eliminate property taxes?

Early edition

By JONI JAMES
Published December 15, 2006

TALLAHASSEE — Tired of high property taxes? Would you rather pay more sales tax? Say, 13.5-percent instead of Florida’s current 6-percent?

That’s one of the controversial options the state should consider as it looks to fix its problem-riddled property tax system, a governor-appointed task force recommended Friday.

But in a sign of how difficult it will be to change Florida’s real-estate based tax system, even some task force members warned that switching to a sales tax could spell doom for Florida’s tourist-based economy.

Gov. Jeb Bush formed the Property Tax Reform Committee four months ago in response to growing outrage over Florida’s broken property tax system.

Not only have tax rates skyrocketed for commercial and investment properties due to increased property values, there are growing inequities among neighbors because of the state’s Save Our Homes tax cap  for homesteaded properties.

On Friday, the committee recommended investigating 12 concepts for how Florida might restructure, or possibly overhaul, its property tax system.

The ideas, some conflicting, range from the popular idea of allowing homesteaded property owners to transfer their Save Our Homes tax savings to new residences; to capping annual growth in local government tax collections.

“What we’re doing now is killing people,’’ said Rep. Carlos Lopez-Cantera, R-Miami, one of three state lawmakers on the governor’s task force.

Friday’s report, the first the committee has produced after six public meetings, isn’t binding in any way. But it provides a roadmap for the options lawmakers and Gov.-elect Charlie Crist might consider during the 2007 legislative session and beyond.

It also highlights why property owners can’t expect a quick fix, if there is a fix to be had at all, in a political climate.
Most of the ideas would require voters to approve an amendment to the state Constitution, but that’s not likely to happen before 2008.

Plus, any change in the current system could require some voters to give up a benefit they already have -- such as the committee’s idea to phase-out the Save Our Homes property tax cap for homesteaded property owners.

Save Our Homes caps the increase in assessed value for a homesteaded property at no more than 3 percent annually, which has created dramatic inequities in tax bills between neighbors who buy similar homes just a few years apart. It has also shifted more of the tax burden onto non-homesteaded properties, such as businesses.

“The more we play around the edges, the more you are continuing to undermine the fairness of the tax system,’’ former Pinellas County legislator Curt Kiser testified before the committee Friday. “And that undermines citizens’ confidence in government.”

The most radical fix proposed – doing away with all property taxes in favor of a bigger sales tax – was first advanced by House Speaker Marco Rubio, R-Miami, and trumpeted by one of Bush’s closest advisors and Rubio’s new budget consultant, Donna Arduin. She also serves on the reform committee.

State economists predicted that the sales tax would need to be about 13.5 percent to generate enough money to eliminate property taxes. Local option sales taxes would be on top of that.

But Hillsborough County Property Appraiser Rob Turner said raising the sales tax so sharply would change shopping habits and hurt Florida merchants.

“We’re three hours from Georgia,” Turner said, “but there is going to be a chain of Wal-Marts along the Georgia-Florida line that would spring up in no time.”

One idea endorsed for consideration by the committee Friday, however, might happen sooner. Lopez-Cantera said he already is working on a bill for the 2007 session that would change how commercial properties are assessed for tax value.

Currently, such land is valued based on its “highest and best use,” rather than its “current use,” which means small business can have high tax rates if their land is attractive to development.

Lopez-Cantera wants the change the law so that business are taxed at the rate that fits the property’s “current use.” Senate Majority Leader Daniel Webster, R-Winter Garden, said the idea could have a favorable hearing in the Senate.

“That is my favorite idea in the whole thing,” said Webster, who runs an air conditioning and heating business that’s been on the same site for 45 years. “Why should you pay highest and best use when we’re not doing anything different?”

[Last modified December 15, 2006, 20:50:50]