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Proposal To Cut School Taxes Would Help All Property Owners

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The Tampa Tribune

Published: January 20, 2008

An idea gaining support in a tax-reform panel would cut all property taxes in Hillsborough County by more than 20 percent.

It's exactly the sort of reform Florida leaders should be talking about. Instead, voters on Jan. 29 are being offered an amendment that would make the tax system even more unfair.

Gov. Charlie Crist has been leaning on business to contribute to the campaign to get the amendment passed. Arm-twisting is required because the measure isn't drawing enough support on its merits.

In contrast, the proposal to eliminate the state's school taxes represents true reform. It would eliminate the state-required school tax from local property tax bills and replace the revenue by closing loopholes in the sales tax and adding some taxes on services.

The concept is sound because, properly done, it would broaden the tax base, ease the burden on all property owners and reduce inequities.

Deciding what to tax would require tough political choices, and some new taxes would have to be imposed. But this approach, championed by former Senate President John McKay, is transparent and honest. It would be a big improvement over the state slyly shifting the cost of schools to county property owners.

About 10 years ago, the state paid 55 percent of the cost of education and counties paid 45 percent. Now the counties are paying 55 percent and the state, 45 percent. Adding insult to injury, state lawmakers are blaming tax increases on the refusal of locally elected officials to cut millage rates.

America's tax system has evolved so that generally, the federal government taxes income, states tax sales and communities tax property. But in Florida, the state has stuck its fingers deep into the property-tax pie.

The shift shows up on property tax bills, but it's hard to recognize. In unincorporated Hillsborough, the state-required portion is about 23 percent of the total bill. In counties with fewer taxing agencies, the state's so-called "required local effort" can reach 40 percent of a taxpayer's bill.

What property owners would save in taxes, consumers would pay on transactions. Unfortunately, there aren't enough available exemptions in the sales tax on goods to cover the gap.

Currently, the state has set aside $12.3 billion worth of exemptions. But almost no one wants to eliminate most of them. For example, no one wants to tax medical care or prescription drugs.

There are plenty of less controversial exemptions, such as fill dirt and ostrich feed, that could amount to $4 billion in extra revenue. But that's only about half of what's needed to cover the $7.9 billion in property taxes the measure would eliminate.

An analysis by the staff of the Tax and Budget Reform Commission concludes that enacting the change "will result in a broad-based services tax."

Florida has tried a services tax before, with results so disastrous the tax was quickly repealed. To tax the wrong services would again cause turmoil and chase business out of state. Among other things, it would be foolish to tax accounting services and create an incentive to have that work performed at tax-free locations out of state.

But it makes sense to tax certain services, at least as much sense as taxing the sale of products and the ownership of property. McKay mentions services such as limousine rides.

It would be up to the Legislature to hammer out the details of what to tax. The work would be controversial but worth the effort because the result would take the burden off property owners, including rental properties and businesses, without damaging education.

Former Florida House Speaker Allan Bense, head of the tax reform panel, said about 2,000 people testified at public hearings around the state, and only a handful had a complaint about the tax treatment of homesteads. Most suggestions and complaints came from owners of small businesses and rental properties, whose taxes have soared in recent years.

It's time Florida got serious about real reform, such as the school tax plan, that provides significant relief to all the right people.

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