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Perspective

Sure, it's unconstitutional, but ...

This is the year of the bold tax idea in Tallahassee. There are proposals to roll back property taxes to an earlier time and to double the homestead exemption. There is talk of making the Save Our Homes tax caps portable and extending them to all properties. There's an even more audacious idea from the House speaker to do away with property taxes altogether for homesteaded properties and substitute a 2.5 percentage point rise in the sales tax. Or to let counties decide something in between. In that spirit, let's throw into the stew pot the one idea no one is floating - a state income tax. Let's peg it at 3 percent. Now catch your breath. We are simply running some numbers to see where they come out. Article VII of the Florida Constitution makes it all but impossible without an amendment, but it's hardly the only idea that would require a constitutional change. In a season of radical ideas, it's just one more.

Tax facts

At its current 6 percent, Florida's sales tax is already among the nation's highest. Raising it to 8.5 percent would vault Florida to No. 1.

Forty-three states levy a personal income tax. Florida, Alaska, Nevada, South Dakota, Texas, Washington and Wyoming do not. In 1901, Hawaii was the first to adopt a state income tax. Connecticut, adopting an individual income tax in 1991, is the most recent to do so.

$11.6-billion is a guesstimate of what government would lose if homesteads were not taxed.

$7.8-billion is what the state would raise from an extra 2.5% sales tax.

$9.4-billion is what a 3% income tax would generate this year.

Run your own numbers

Use the net taxable income from your 2006 federal income tax return (line 43 on Form 1040). Multiply the number by 3% for the impact of a 3% state income tax. Use IRS Publication 600 (available at www.irs.gov) for sales tax. Find your income bracket and household size in the Florida table and divide that number by 6. That's what the IRS estimates each 1% of state sales tax costs you in a year (assuming you don't buy a vehicle). Have something to say? Do so at itsyourtimes.com

The assumptions

- A 3 percent state income tax would apply to the net taxable income reported to the IRS. Under this scenario, the sales tax would not change and homesteads would no longer be taxed.

- The Florida Tax Handbook estimates that the current 6 percent sales tax will raise $23.6-billion this year. Assuming that people don't buy less because of a higher tax, an additional 2.5 percent sales tax would raise an extra $9.8-billion. The House figures that spending patterns would change, adding only an additional $7.8-billion.

- The Florida Tax Handbook estimates that a 1 percent state income tax would raise $3.12-billion. We applied a 3-percent tax to triple that number.

- This chart does not address a plan that would roll back property taxes to years-old levels.

		Current	With extra 2.5% sales tax	With 3% income tax
Family of four, annual income of $64,280, recently purchased a home	Property tax	$4,052	0	0
	Sales tax	$950	$1,290	$950
	Income tax	0	0	$1,022
	Total taxes	$5,002	$1,290	$1,972
Same family, same home but assume they've owned for a long time	Property tax	$1,968	0	0
	Sales tax	$950	$1,290	$950
	Income tax	0	0	$1,223
	Total taxes	$2,918	$1,290	$2,173
A couple, annual income of $46,914, who rents	Property tax	0	0	0
	Sales tax	$691	$937	$691
	Income tax	0	0	$900
	Total taxes	$691	$937	$1,591
Retired couple who owns a homesteaded home	Property tax	$1,505	0	0
	Sales tax	$589	$800	$589
	Income tax	0	0	0
	Total taxes	$2,094	$800	$589

In the examples above, the incomes are based on median family incomes in Florida . Sales tax is based on the IRS table for calculating the sales tax deduction. The number would rise if the family bought a vehicle or made another large purchase.

In Case 1, the family makes $64,280 and recently bought a home in St. Petersburg with a taxable value of $175,000. They are taxed at near market value. After deductions, taxable income is $34,080.

In Case 2, that same family has owned that same home for years and is protected by the Save Our Homes cap (a taxable value of $85,000 under the cap). While they save a great deal on property taxes, taxable income is a bit higher - $40,780 - because mortgage interest deduction is lower.

In Case 3, the renter couple makes $46,914, of which $30,014 is taxable. We're making no assumptions about how much their rent would rise because their landlord's costs rise.

In Case 4, living in their house for years, the retirees have a $65,000 taxable home under the Save Our Homes cap. Making $34,000 including Social Security, they would have no taxable income.

Compiled by Helen Huntley, Joni James, Angie Drobnic Holan and Jim Verhulst. Sources: Florida Tax Handbook, Florida TaxWatch, Florida League of Cities, Legislative Committee on Intergovernmental Relations, IRS, Pinellas County Property Appraiser.

[Last modified March 24, 2007, 11:06:42]