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House weighs end to property taxes

Lawmakers suggest voters replace it with a higher sales tax.

By ALEX LEARY
Published February 21, 2007

TALLAHASSEE — Striking out to claim the lead in solving one of the state’s highest-profile problems, the Florida House on Wednesday proposed eliminating property taxes for homeowners and imposing revenue caps that would strip billions from local government budgets.

House Republicans want to scratch property taxes on all primary residences. Instead, the state sales tax would be increased by 2.5 percent — subject to voter approval.

“This is the single largest tax cut in Florida history,” said House Speaker Marco Rubio, putting the net taxpayer savings at $5.8-billion in the first year.

The plan would leave millions of Florida homeowners without a property tax bill. But everyone, including tourists, would pay a statewide sales tax rate of 8.5 percent, which would be the highest in the U.S.

The tax shift drew immediate reaction, and not all of it was favorable.

“When you rob Peter to pay Paul, often you have very serious unintended effects,” said Dominic Calabro, head of the watchdog group Florida TaxWatch.

The House proposal is far more dramatic than one put out several weeks ago by Gov. Charlie Crist, which itself was considered bold. And it sets the stage for a race among Tallahassee leaders to solve a problem that has incited property owners across the state. The Senate is not expected to release its proposal until mid-March.

The House plan is divided into several parts. The first calls for the Legislature to vote this spring to limit property tax collections by local governments, effectively imposing a cap on government spending.

A baseline would be established by rolling back property taxes to 2000-2001 levels, before the real estate market took off, and adjusting by a formula on population growth and inflation. Any new revenue collected after that would be limited by the same formula. A county commission or city council could go above the cap, but only by unanimous vote.

Since 2000, cities have nearly doubled property tax levies, outpacing personal income growth. County taxes have skyrocketed as well. “The roll back restores property taxes back to more reasonable levels and works to limit excessive local government expenditures,” said Rep. Michael Grant, R-Port Charlotte.

Cities and counties, however, say a cap could have a crippling effect, triggering cuts in essential services and public projects.

“Most of our budget goes to police, fire and parks and recreation,” said Tampa Mayor Pam Iorio. “We have to be careful that across-the-board, statewide cuts do not affect our delivery of basic services.”

“They are substituting state government for local government,” said Polk County Commissioner Bob English, who said the roll back would take $50-million from his budget. “It’s going to be a disaster … It’s dumb.”

The House also wants to ask voters to change the state Constitution to eliminate all property taxes on primary homes in exchange for a higher sales tax. The House proposes a special election for later this year.

Businesses and second home owners would still pay property taxes, but not as much due to the revenue caps. The average homestead owner would save $2,283, while a second home owner would save $767 and a business owner $3,353, according to House estimates. The benefit for renters is unclear, though Republicans argued that landlords would not be inclined to increase rents under the plan.

A proposal to amend the Constitution in a special election would require approval of three-fourths of both houses of the Legislature. Then it would go before voters as early as this fall. With some Republicans joining Democrats in questioning the House plan, passage is far from certain.

Crist, who has proposed doubling the $25,000 homestead exemption among other ideas, called the House plan “intriguing,” and neither endorsed it nor criticized it. “The comfort I think all of us have with any of these proposals is that the ultimate decider will be our bosses — the people — and that gives me tremendous comfort because I trust them,” Crist said.

The additional 2.5 percent in sales tax would generate an estimated $7.78 billion in the first year and would be shared among local governments and school districts. A distribution formula has not yet been developed.

“The last thing we need to do in a retail economy is depress spending,” Rick McAllister, president of the Florida Retail Federation, said of the sales tax proposal. “Lawmakers really need to think this through to see how this will affect our economy.”

Sen. Jim King, R-Jacksonville, said the higher sales tax amounts to a penalty on the poor because they would pay the same higher rate for taxable goods as people who make more money. “They would have far less money to pay for what they barely can pay for now,” he said.

House Democratic leader Dan Gelber, D-Miami Beach, credited Republicans for a bold idea but added: “We must be cautious that we do not shift the tax burden from one group to another. We cannot simply replace one group’s pain with another’s.”

Part of that pain could be absorbed by the millions of tourists who visit Florida each year. Nonresidents already pay about 15 percent of Florida’s sales taxes.

Addressing some concerns, Rubio noted that food, medicine, rent and other essential items are not subject to sales tax.

As much as people hate property taxes, they are a highly reliable source of revenue for government. Sales taxes are not as stable, experts say. By shifting more burden on sales taxes, governments would be less insulated against the elastic fluctuations of economic trends.

The House proposal would do away with all property taxes on homesteaded homes, including the range of special taxing districts that raise money for such things as fire rescue operations. But local government still could assess fees to use parks or recreation facilities and some say those likely would have to rise to recover lost tax money.

Times Capital Bureau Chief Steve Bousquet and staff writer Janet Zink contributed to this report.

[Last modified February 21, 2007, 22:46:59]