Intangibles tax hangs in the balance of the budget

The House and Senate, trying to make up a $1.3-billion shortfall, are at odds over a cut in the tax on investments.

By ALISA ULFERTS

© St. Petersburg Times,
published October 30, 2001

TALLAHASSEE -- Depending on whom you ask, it is a tax break for the rich or a way to let modest retirees keep more of their hard-earned savings.

Either way, a cut in the Florida's intangibles tax on stocks and bonds has become the line in the sand that neither the House nor the Senate seems willing to cross in negotiations over the $1.3-billion hole in the state budget.

What exactly is this tax and who pays it? Floridians with investments such as stocks and bonds pay a $1 tax per $1,000 of the value of their portfolios, according to the Department of Revenue. Currently, the first $20,000 worth of those investments are exempt for an individual, and the first $40,000 for a couple.

Under a law that lawmakers approved earlier this year, the exemption would be raised to $250,000 for an individual and $500,000 for a couple. That law will remove more than a half-million Floridians from the list of those having to pay the tax.

"As far as the number of people paying it, that number is going to be significantly reduced" if the new law goes forward, said Dave Bruns, spokesman for the Department of Revenue.

The Senate wants to hold off on the latest exemption, hoping to cull another $128-million to help balance the budget; the House leadership steadfastly refuses.

Republican House leaders say the tax penalizes people for investing and putting away money for retirement, and that it taxes money people have already paid taxes on.

But the senators who would keep the tax in place say their position beats the alternative of deeper cuts in education and health care for the poor.

Further complicating the fight was last week's House vote to take up the Senate's milder budget cut plan -- minus the intangibles tax cut repeal -- instead of the House's plan.

The vote surprised senators, who had hoped to persuade the House to drop the tax cut during traditional negotiations to resolvedifferences in the two plans. The Senate budget plan would cut $800-million in spending.

"The House believes the best offer we'll get from the Senate is on the table right now," House Speaker Tom Feeney said Monday.

"If the Senate thinks they have bugs or problems in this bill, I wish they'd send us another," he added.

Gov. Jeb Bush has called the intangibles tax "insidious" and led the effort in the GOP-controlled Legislature to gradually phase it out over the past three years.

(Even under the current law anyone owing less than the minimum $60 gets off free. That means an individual must hold at least $80,000 in stocks before he or she pays the tax, Bruns said.)

Bush suggested last week that the two sides compromise and delay the exemption expansion, not kill it. But his chief negotiator, Lt. Gov. Frank Brogan, said Monday that the budget deal could move forward even without an agreement on the tax issue.

"Our budget people tell us the budget is balanced even without any movement on the intangibles tax," Brogan said Monday.

But will even that be enough to end the stalemate?

"These are very principled people and principled, by the way, is not code for hardheaded. . . . Plan A is to continue to negotiate, see if we can get them into conference, which is the right way to travel," Brogan added.

-- Times staff writers Stephen Hegarty and Lucy Morgan contributed to this report.

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