Wednesday, March 19, 2008

Florida's Tax Swap Proposal - Eliminate School Portion of Local Property Tax in Exchange for Higher Sales Tax Rates, Fewer Exemptions and a Broader Base

On March 18, 2008, the Miami Herald reported that  Florida's Taxation and Budget Reform Commission has agreed to place before Florida voters a proposal to lessen local real property taxes in that state by 1/4 to 1/3 of present amounts (a total of about $9.3 billion).  The reduction occurs by eliminating the portion of the property designated by the state as being for public schools.  Florida legislators say that they can only pay for this size of a property tax reduction by increasing sales tax revenues.  The only way to increase sales tax revenues is by increasing the rate (Florida plans a 1 penny sales tax increase which will raise about $4 billion), reducing exemptions or expanding the base.  This last issue (expanding the sales tax base) indicates that Florida will likely have a big "tax on services" fight - yet again.  Here is an excerpt from the article:

''We think this proposal will force the Legislature to adopt services taxes because the numbers just aren't there,'' said Allan Douglas of the National Federation of Independent Business.

Commissioner Randy Miller, a member of the Florida Retail Federation, was one of four members voting against the proposal.

''We're not doing anything here except changing who pays the bill,'' he said. If legislators were to eliminate all tax exemptions on businesses, he said, they will raise only $2.13 billion a year and will have nowhere else to go except to tax services.

Proponents of the plan argue that the elimination of one-fourth to one-third of all property taxes will spur the economy, stimulate housing sales and business growth and revive Florida's economy. That, in turn, would increase collections of other taxes such as the documentary stamp tax on real-estate transactions and the sales tax, they said.

For the entire story, see "Property-tax proposal could give South Florida big savings" in the March 18, 2008, edition of the Miami Herald.

DAB

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