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Effects Uncertain As Property Tax Ballot Proposal Vote Looms
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Published: July 24, 2008
Updated: 07/24/2008 12:33 am
TALLAHASSEE - An open-ended proposal to cut property taxes and raise other revenue had both supporters and detractors struggling this week to predict how the measure would affect the Floridians who vote on it in November.
On Wednesday, Florida TaxWatch charged that the property tax "swap" is a "Trojan horse" that hides a potential tax increase of up to $3 billion. The group's blistering analysis came one day after the state's Realtors and several lawmakers kicked off a $1-million-plus campaign to convince voters to pass the measure.
Dominic Calabro, president of TaxWatch, said Amendment 5 would trigger "a massive tax increase" and likely necessitate "multibillion-dollar" cuts to core government services such as health care and the courts.
Amendment 5 would eliminate the portion of property taxes that pay for K-12 public schools, lowering total tax bills by 25 percent to 40 percent. It would force lawmakers to choose from several options to replace the eliminated property tax portion of school funding, but there is no way to forecast which options they would approve. And with the state of Florida's shaky economy in flux, the plan's ramifications remain more speculation than fact.
Lawmakers could restore the lost revenue for schools with a 1-cent increase in the sales tax, cutting the state budget, repealing tax exemptions, or a combination of those. If lawmakers can identify new revenue stimulated by the property tax cut, they can apply that revenue source, too.
"The passage of Amendment 5 is critical to Florida's housing market and to our overall economy," John Sebree, vice president of the Florida Association of Realtors, said. "The financial benefits to individual taxpayers is huge; the long-term benefit to Florida's economy is mind-boggling."
But TaxWatch argues that the numbers don't add up, because the amendment also requires a funding increase for education. According to the conservative watchdog group, the amendment would force lawmakers to find up to $3 billion more in revenue for schools than Amendment 5 would cut.
Here's how:
Amendment 5 states that in 2010-11, the year it takes effect, K-12 public schools must receive the amount of funding they are receiving today, plus an allowance for growth. Schools receive $16.9 billion this fiscal year; the growth factor boosts that figure to $19.7 billion for 2011.
This year, property taxes provide $8.27 billion for schools. TaxWatch does not think that under the existing system the state would increase its portion much beyond $8.6 billion it currently appropriates to schools anytime soon.
Between the $8.27 billion lost by eliminating the property tax portion and the extra $2.8 billion factored in for growth by 2011, the total the state would need to raise to compensate for cutting the tax would be about $11.1 billion. That's roughly $3 billion more than this year's property tax appropriation for schools.
Former Senate President John McKay of Bradenton, architect of Amendment 5, said TaxWatch is inflating the additional revenue that lawmakers will have to come up with by low-balling what the state would pay for schools under the existing system between now and 2011.
"Dominic's trying to scare everyone," said McKay, noting that TaxWatch is funded largely by businesses that tend to eschew sudden changes in the tax code.
The ongoing debate over the proposal's cost makes it that much harder to predict how lawmakers would restore the funding for schools.
With a penny increase in the sales tax expected to bring in only between $3.9 billion and $4.5 billion - depending on which analyst you ask - TaxWatch raised the specter of having to levy taxes on professional services, ranging from dry cleaning to chauffeuring. The group identifies fewer than $1 billion worth of sales tax exemptions on items that can easily be repealed without harming residents or the economy.
McKay disagreed, arguing that there are more sales tax exemptions and exclusions that can be lifted, without taxing services.
Wednesday, both opponents and supporters said they would produce clearer scenarios in coming weeks to better illustrate what the specific effects of the amendment could be.
For now, said Sebree of the Realtors association, the clearest part of the picture is the public's demand for tax reform.
"Property taxes in Florida have ... doubled in the past six years, and with higher fuel prices and cost of food and everything, people are having a tough time making it month to month," Sebree said. "The people of Florida need relief."
Reporter Catherine Dolinski can be reached at (850) 222-8382 or cdolinski@tampatrib.com.
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