One man's tax cut is another's burden

MELONE E-mail: Click here Archive

© St. Petersburg Times,
published November 4, 2001

The intangibles tax -- the center of so much debate in the state Legislature -- really did start out as a tax on the rich.

Only a lucky few had anything left in the Depression-battered stock market when Florida adopted the tax in 1931. So the lucky few had to pay.

Seventy years passed. Year in, year out, the tax was levied on stocks and bonds, and when they got to be popular, mutual funds as well. (Most employee benefit plans, even those with stock market investments, are exempt from the tax.)

Republicans began nibbling at the edges of the tax in 1998. The biggest change they've made was passed last spring, and it's a doozy.

Individuals used to have to pay taxes on anything over $20,000 and couples, over $40,000. For every $1,000 owned, a person had to pay one dollar in tax.

But last spring new baseline taxable amounts were approved, 10 times higher than the old. An individual now will have to pay taxes only on amounts over $250,000, and couples, $500,000. This means thousands of people will no longer have to pay the tax. Only people with pretty big portfolios will have to pay it -- although if they put their money in a tax shelter, as some do, they can quite legally escape the tax.

The higher exemption amounts are set to take effect in January. This is what Senate President John McKay wants to repeal and House Speaker Tom Feeney wants to maintain.

The speaker is going with the tide. Nine other states have intangibles taxes, according to Dave Bruns, spokesman for the Department of Revenue, but some other states are getting rid of the tax.

It is perpetually controversial. People complain they are being taxed on stocks they bought with money they already had been taxed on, and will be taxed on again when they sell them. And they argue they are being penalized for being good savers.

The number of people who will benefit by the tax cut has been much debated. My own try Friday at finding a reliable number failed.

The fight over the intangibles tax turns on this point, about whether the tax relief will go to the well-to-do or whether a large number of people of modest means are also affected. If you assume the latter is true, then the political fight in Tallahassee over the budget is particularly cruel.

The budget slashes programs for the poor and disabled while giving this tax cut. The middle class is pitted against the poor and disabled, with powerful legislators hovering above, deciding who is deserving and who is not.

It is one thing to argue that middle class savers ought not to be penalized for their discipline. It is another thing to say -- even if it is never said directly -- that the poor are somehow responsible for their plight.

But Tom Feeney must believe this. How else could he justify the reductions in social programs that will occur if the intangibles tax cut remains?

And I heard it in phone calls and e-mails I received after I wrote Thursday about the battle in Tallahassee over the tax. The tone of the e-mails and phone calls was self-righteous, angry, indignant. Let them get a second job, one man said, or even a third.

The state budget is not final. After a contretemps of the first order last week, the House and Senate are preparing to settle their differences. The state is short $1.3-billion. If the intangibles tax cut were killed, there would be an additional $128-million for the budget.

There might even be money enough to protect the poor and the disabled. But I'll believe it when I see it. I think of the words of a novelist born in Tampa, Jose Yglesias, who once wrote that the letters of the poor are not read but weighed.

-- Mary Jo Melone can be reached at mjmelone@sptimes.com or (813) 226-3402.

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