COMMENTARY: Florida’s regressive tax structure backfires in distant boom

Feb 28, 2008

Orlando Sentinel--Feb. 28, 2008
Mike Thomas

Florida is in the bust phase of our boom-bust state budget cycle.

A couple of years ago, we were so flush with cash the politicians hardly could spend it.

Now, they are in the midst of slashing up to $4 billion. Gov. Charlie Crist doesn’t want to go there. Cuts make people mad.

He wants to cobble together a budget based on raiding reserve funds, increasing gambling revenues, sacrificing a few virgin chickens and praying for an economic recovery next year.

Charlie, who also predicted a “sonic boom” in home sales when Amendment 1 passed, is alone in his latest delusion. So lawmakers are preparing to sacrifice budgets, beginning with schools.

The disagreement here is one of timing: When will the next boom hit and recharge the budget? Charlie says sooner; his Republican cohorts say later.

They’re both missing the real point: We can’t go on like this.

We face $50 billion in unfunded traffic improvements in the next 20 years. We also will need almost $14 billion for water and sewage plants.

Schools are under-funded, cash-strapped universities are restricting enrollment, crime is getting more violent and Medicaid costs are spiraling out of control.

Add it all up, and for many people the cost of life here is not worth the quality of life. Polls show residents are increasingly unhappy. Unprecedented drops in school enrollment show families are voting with van lines.

To make Florida a more desirable place to live, one that will attract more quality employers, we need to upgrade.

But increasing our narrow, distorted tax structure enough to pay for it puts too heavy a penalty on the middle class. Florida is known for having the most regressive tax system in the nation.

We depend on two basic sources of money: property taxes, and a sales tax on goods that is riddled with exemptions.

We used to have an intangibles tax on investments that targeted wealthier residents, often retirees. But Jeb Bush dumped it, costing the state billions and shifting more of the tax burden down to the families now fleeing the state.

Our tax on the sale of goods covers a shrinking percentage of the economy. It doesn’t capture most Internet sales. It doesn’t capture the sale of services. This has put more pressure on property taxes.

To ease that tax pressure, we limited increases on property-tax assessments for homeowners, with the richest ones getting the biggest breaks. That shifted the tax pressure to new buyers, renters and businesses.

And so there is talk of more cuts in property taxes, balanced in part by an increase in the sales tax and partly by more budget cuts.

We can’t fix Florida’s sagging economy and plan for the future by creating ever bigger distortions in our tax structure.

The sales tax is prone to sharp fluctuations. Becoming more dependent on it makes long-term planning for transportation, education, research universities, prisons and the environment even more improbable.

But nobody in Tallahassee dares say that such things cost money. Nobody takes on the special interests that exempt themselves from the tax codes.

Instead they tell us taxes are too high, and nix any notion of planning for a sustainable state.

Planning for the future in Florida means little more than planning for the next election.