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As Bush gossip flew, big tax reform idea was afoot

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By HOWARD TROXLER

© St. Petersburg Times, published May 16, 2001


What we call "news" can be either interesting or important. It is sure interesting to trade sleazy rumors about the governor. But that flap has overshadowed something said this week by the president of the Florida Senate that was way more important.

John McKay is a Republican senator from Bradenton. He leads a generally pro-business chamber. Yet McKay wants to make a fundamental change in the way Floridians pay taxes -- and many Florida businesses will hate it.

McKay says he is serious about exploring a sales tax on professional services, such as attorney's fees. Hundreds of these services in Florida are untaxed. Instead, the state relies mostly on a 6 percent tax on retail sales -- your TV, your shoes, most of the things you buy at a cash register.

Our over-reliance in Florida on the retail sales tax to pay for our government is bad for two big reasons.

The first reason is that it is an unstable source of money. When the economy dips, people spend less on taxable goods. But that happens just as unemployment, crime and the need for government services rises.

So a broader tax base puts our eggs in more than one basket.

The second reason is that the retail sales tax is regressive. The less money you have, the bigger a share of your income you pay in taxes.

That might not be obvious at first glance. After all, the 6 percent tax applies to everybody. A rich person pays the same tax as a poor person for the same TV.

But the more money you have, the bigger the share of it that you spend on things that are not taxed. Poor people do not have architects, landscape designers and consultants.

Florida does not tax a rich person who hires an accountant to handle his wealth. But it taxes the shoes that poor people put on their children's feet.

We are not talking here about a groundswell, populist movement to hurt the rich and help the poor. Instead, many conservatives have come full circle, and believe that a broader tax base might allow the rest of us to pay less in sales or property taxes.

The first time anybody tried this idea, it was a political disaster.

The year was 1987. A Republican governor, Bob Martinez, worked together with a Democratic Legislature to pass a services tax. But the interest groups who were affected staged a revolt. They were led by the media -- television stations, newspapers and the advertising industry. They blanketed the state with hostile advertising and changed public opinion.

Within weeks, Martinez lost his nerve and flip-flopped. The Legislature rushed back to Tallahassee to repeal the tax -- and instead raised the retail sales tax from 5 percent to 6 percent, where it remains today. Some counties tack on more sales taxes.

Martinez never recovered his popularity and was defeated by Lawton Chiles in 1990. Chiles himself proposed a services tax in 1992, but it came to nothing.

We are almost a full year away from next year's session of the Legislature, when we will learn whether McKay is just whistling Dixie. Next year is an election year, and a year for redrawing Florida's political districts, which makes a major tax reform even more difficult.

Still, John McKay is the highest-ranking Florida political leader to raise the idea in years, and if anyone can force a much-needed look at the state's tax structure, he can. That is why McKay is my nominee for the biggest Florida political news of the week.

- You can reach Howard Troxler at (727) 893-8505 or at troxler@sptimes.com.

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