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Florida Needs Tax Reform, Not Tax Relief

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The Tampa Tribune

Published: November 20, 2007

Florida's lawmakers are once again scrambling to shore up the state budget in the face of a slumping economy. It's human nature to deal with the here and now. But what's needed - and desperately so - is a plan for the long haul, not just the next election cycle.

The property-tax break that the Legislature has proposed for the statewide ballot won't do anything to change Florida's systemic fiscal problems. We need tax reform, not just tax relief.

Florida's current economic troubles shouldn't come as a real surprise. Two years ago, the nonpartisan LeRoy Collins Institute at Florida State University released an important economic study, "Tough Choices: Shaping Florida's Future," warning that the real estate boom would end and leave a budget hole. Some leaders ignored the study because Florida was swimming in revenue. Now the predictions have come true.

Carol Weissert from Florida State and David Denslow from the University of Florida, the fiscal experts who did the study, have now revisited the data in Tough Choices. They find that next year's budget woes are likely to be worse than this year's.

But they warn that it is important not to overreact to short-term spending troubles with tax giveaways and drastic cuts. Over the long haul, Florida's economy will hold.

Retirees are still moving south. And the wealthiest among them, the researchers find, will head to Florida and buy expensive coastal real estate. Other studies show that retirees' destination choices are not sensitive to taxes. Florida would be silly to sell itself cheap.

Instead, careful investments need to be made to ensure that Florida remains competitive and catches up to the levels of service offered by other southern states. Despite the recent boom, Florida continues to lag in education funding, both for K-12 and for higher education. The spending gap between Florida and other states widened even during relatively flush economic times.

Low tuition and stingy state support for public universities have compromised their performance even as the number of students seeking admission increases. Cutting education funding in times of short-term economic difficulty will hurt our state. The gap between the "haves" and "have-nots" will widen.
Tough Choices set out to answer a basic question: Will Florida's current tax structure support the needs of future Floridians? The answer is no.

Florida needs to broaden its tax base and close loopholes. Uncollected taxes on Internet sales, for example, amount to as much as $2 billion each year. Several policies could be tightened up to provide more revenue.

New construction, for example, inexplicably gets a property tax break for as long as a year. It ought to be taxed as soon as local government issues a certificate of occupancy. And many of the sales tax exemptions on Florida's books don't pass the test for public interest.

It's also worth taking a hard look at the way we use our education dollars, possibly considering limiting class size requirements and Bright Futures scholarships to free up money for other education needs.

Now that the Legislature has chosen to provide tax relief, and not tax reform, the task of looking long-term rests with the Florida Taxation and Budget Reform Commission.

The commission meets just once every twenty years, and this is the year. This appointed group of thinkers is insulated from short-term politics. And in an increasingly fast-paced political world, its work couldn't be more important.

We're lucky that the Taxation and Budget Reform Commission is meeting now, providing an opportunity for long-term thinking. Commissioners should take this opportunity to begin reforming Florida's 1940s tax system to suit our 21st-century economy.

Curt Kiser served 20 years in the Florida Legislature and is chairman of the LeRoy Collins Institute.

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