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Good, bad and ugly tax reform

By A TIMES EDITORIAL
Published April 18, 2007

As Florida legislators prepare to consider vastly different property tax relief plans this week, one proposal deserves serious consideration and one does not. The Senate's bipartisan package is more thoughtful and nuanced in its approach to simplistic solutions we have opposed: arbitrarily rolling back property taxes, doubling the homestead exemption and expanding Save Our Homes. In contrast, the House Republicans' proposal is fundamentally unsound, strangles local government and raises false expectations that property taxes for homeowners could magically disappear. The gulf is so wide that it may be impossible to reach a compromise in the last two weeks of the legislative session - and doing nothing now is preferable to a last-minute deal that does more harm than good.

By itself, the Senate's complex proposal requires time to digest. Local governments would be required to provide reasonable property tax relief in the coming year and more the following year. The spending cuts could be painful but hardly fatal, and cities and counties would have time to adjust.

Similarly, the property tax shock would be softened for first-time home buyers and homeowners who buy another house. But the breaks would not last forever. First-time home buyers would get an additional $25,0000 homestead exemption that would decrease over the years as their home value went up and the Save Our Homes cap kicked in. Similarly, existing homeowners who move could take with them up to $500,000 in value protected by Save Our Homes. Rather than face a huge tax bill immediately, their assessed value would rise by 10 percent a year until that break disappeared.

These are concepts worthy of serious discussion. They sand off the roughest edges of imposing revenue caps on local governments, doubling the homestead exemption and providing portability for Save Our Homes. But they are incredibly complicated, and Floridians need time to ponder them. Working out the details in two weeks would be difficult even if the Senate and House weren't starting their negotiations as polar opposites.

While Senate Republicans and Democrats are approaching tax relief with surgical precision, House Republicans are recklessly swinging a sledgehammer with no regard for the consequences. Their plan to roll back property taxes to the preboom years would devastate basic local government services and programs that residents expect. Their attempt to allow voters to replace stable property tax revenue by increasing the volatile sales tax by up to 2.5 cents is irresponsible and not based on sound tax policy. Republican lawmakers should not allow themselves to be bullied by the House leadership into voting for a plan that is so reckless and so unlikely to become law.

House Speaker Marco Rubio also is making a serious mistake by turning tax relief into a partisan issue and spreading so many falsehoods. For example, a Web site promoting his tax plan claimed it is a myth that the proposal could result in the nation's highest sales tax. In fact, it would be the highest. The Web site also claimed it is a myth that the sales tax is regressive. Nonpartisan economic experts, including Florida TaxWatch, say the reality is different. The Web site, which is no longer linked from the state Republican Party Web site, and Rubio's other hardball tactics hardly create an environment for compromise.

There are some areas where lawmakers could easily reach agreement. A new $25,000 exemption for tangible property taxes would help small businesses that pay less tax than the costs to prepare the forms. Changing the way property is assessed to reflect its current use - a small beach motel, for example, rather than its potential highest and best use, high-rise condos - would be another step in the right direction.

Beyond that, lawmakers should proceed with extreme caution.

[Last modified April 17, 2007, 21:32:02]