State: State tax cuts to be tougher, Bush says

The tax cut signed into law by President Bush last week will eliminate the federal estate tax -- meaning that Florida and several other states will lose millions in tax revenue. The cost to Florida is $174.3-million in 2003, and millions more in years to come.

Bush said it might make it difficult for the Legislature to phase out the state intangibles tax next year, because less money will be available.

Nevertheless, Bush said he supports the cut in the estate tax -- called the "death tax" -- even if it means a tighter budget for Florida.

"Some people might call it a hit, but I call it tax relief," Bush said. "It would be a little hypocritical to say, "Well, woe is the state of Florida,' because I think the death tax is a horrible tax. "I'm happy Congress eliminated it. We were disappointed they didn't phase it out over 10 years. We'll live with it."

Currently, states get about 20 percent of the money raised from federal estate tax. In one version of the tax cut bill, Florida would have faced a loss of $460-million.

Gov. Bush had urged Congress to slow the phaseout of the tax. U.S. Sen. Bob Graham, D-Fla., and the National Governor's Association tried but failed to soften the blow to states such as Florida.

In Tallahassee, lawmakers are just coming off the tightest budget year in a decade. Last month, they considered cuts for next year's budget that were thought to be politically explosive in a state with such a high concentration of seniors.

Bush and state lawmakers ultimately restored some of the spending, and also found enough money to pay for another round of tax breaks for Florida taxpayers. The $175-million in tax breaks the Legislature approved include another tax-free shopping holiday and another reduction in the intangibles tax on stocks, bonds and other investments.

But it didn't cut the intangibles tax enough to satisfy Rep. Mike Fasano, R-New Port Richey. Fasano, the House majority leader, agrees with Bush that the state won't be able to phase out the rest of the intangibles tax as quickly as he'd like.

Had the Legislature trimmed more from that tax in the latest legislative session, Fasano said, "It would have been a lesser burden on the state revenue next year."

Fasano said he supports the president's tax cut plan, despite its financial effect on the state's revenues. The Legislature simply will have to set and keep its spending priorities in the coming years, Fasano said.

And that's what Florida TaxWatch, the watchdog group that identifies "turkeys" in the budget every year, wants to hear. The group issued an alert this week calling on legislators and the governor to eliminate superfluous spending from the budget.

"Even without the accelerated phaseout of the estate tax, Florida's state budget could be hard-pressed if recent declining revenue growth continues," said Keith Baker, chief operating officer for the group.

In years past, Bush has shown legislators that he will not tolerate turkeys, projects that solely benefit a legislator's district. In 1999 and 2000 he vetoed $313-million in special projects from the state budget.

Bush said Thursday he expects to get the budget today. Senators requested about $2.3-billion at the beginning of the legislative session this year and House members $5.3-billion, although it's unclear how many of those local projects would meet the turkey criteria.

- Times staff writer Julie Hauserman contributed to this report.

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