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GOP's tax scheme is reckless, unfair

By A TIMES EDITORIAL
Published February 28, 2007

The line between bold and reckless has been erased in the Florida House. A Republican plan to cap government revenues, abolish property taxes for homesteads and enact the nation's highest sales tax is so irresponsible and poorly designed it would be laughed off if it wasn't backed by House Speaker Marco Rubio and his leadership team. They have created a risky scheme that would make a broken tax system more unfair, undermine the state's tenuous financial stability and erode our quality of life.

First, legislation that would roll back property tax rates six years to reduce bills by 20 percent is more unreasonable than it sounds even though it factors in population growth and inflation. To achieve that goal without affecting schools would require draconian cuts in spending by counties, cities and taxing districts unless a super-majority of local government officials voted to exceed the cap. St. Petersburg's property taxes don't even cover the cost of police and fire protection now. Local governments always can tighten their belts, but this would be a noose around their necks.

The House Republican plan then calls for a special election this year for voters to consider a constitutional amendment that would permanently strangle state and local governments with revenue caps tied to population growth and inflation. This is a sentence to permanent mediocrity at the very time state and local governments should be investing more in public schools, higher education, affordable housing, transportation and health care. With medical costs rising and more uninsured Floridians than ever, what kind of a state responds with arbitrary spending limits on Medicaid?

The most politically enticing element of the plan calls for voters to consider eliminating property taxes on all homesteaded property, which would trigger an increase in the sales tax by 2.5 cents. That is just as ludicrous as proposals by fiscal conservatives to replace the federal income tax with a national sales tax. It also reflects a lack of understanding about state tax policy and history.

Florida already relies too heavily on the sales tax, which is a less reliable source of revenue than property taxes. These legislators don't remember what it was like to see billions trimmed from the state budget when tax collections lagged in the early 1990s. They already have forgotten the new insurance law they just voted for could force the state to raise the sales tax after a major hurricane to help cover insured losses. Increasing the state sales tax to 8.5 cents (9.5 cents with local option sales taxes in Pinellas, Hillsborough and Pasco) now would make responding to a natural disaster later even more difficult.

Despite Rubio's rhetoric, this is a plan that lacks fundamental fairness. The sales tax is a regressive tax that disproportionately hits the poor and the middle class, and no amount of Republican spin changes that fact. Eliminating property taxes on homesteads and approving the nation's highest sales tax only transfers the tax burden from the most affluent homeowners to those Floridians who can least afford it. Instead of taxing assets, it taxes consumption. And to top it off, there would be a $5.7-billion deficit for local governments to eat between what they collect now in property taxes and what they would receive from the sales tax increase.

The tax debate in Florida boils down to complaints that soaring property values have caused property taxes to rise faster than the ability of property owners not protected by Save Our Homes to pay them. There are solutions that are both bold and responsible. One, of course, is a modest state income tax that could be tied to lower property taxes. Another is a broader-based sales tax that would be extended to some services. Another is a reasonable annual cap, say 10 percent, on increases in property values for businesses and nonhomesteads for tax purposes.

Rubio is right about one thing. Gov. Charlie Crist's plan to double the homestead exemption, extend the Save Our Homes tax break to all property and let home buyers take the tax break with them when they move would create more inequities than we have now. But the House Republicans are wrong about everything else, and their plan is not a viable alternative.

[Last modified February 27, 2007, 23:38:06]