Property-tax proposal could give South Florida big savings

Mar 18, 2008

Miami Herald--Mar. 18, 2008

One of the biggest tax cuts in state history is headed for the November ballot, after a powerful state commission voted Monday to put an amendment before voters that would scrap most of the portion of local property taxes that goes to schools.

If approved, the amendment would force the Legislature to make up the lost money by hiking the sales tax by up to a penny, cutting the state budget and eliminating some sales-tax exemptions.

The proposal by the Taxation and Budget Reform Commission would mean a cut in the average property-tax bill in the state of about 25 percent — but closer to 33 percent for Miami-Dade taxpayers and 36 percent for Broward, where a larger chunk of property-tax bills go to school districts.

A penny sales-tax increase would cover only about $4 billion of the estimated $9.3 billion lost to schools in property taxes, so the amendment requires lawmakers to make up the rest beginning in the 2010-11 school year, when the cut could take effect, to keep school budgets whole.

Miami-Dade school district spokesman John Schuster said forcing the Legislature to replace property taxes with sales taxes — a less reliable source of money — to pay for education could have drastic effects on education budgets. ”This could have a devastating impact on our students, who are Florida’s future,” he said.

Broward Schools Superintendent Jim Notter said he wants to see how the proposal could affect Broward and other school districts, but he is skeptical about some of the plans to make up funding: “It absolutely does concern me.”

Still, panel members praised the proposal as historic and monumental and said it will trigger a rebound in Florida’s real-estate-dependent economy.

The commission, which meets every 20 years and has the power to put constitutional amendments directly before voters, voted 21-4 for the measure, which was a hybrid of two proposals pushed by John McKay, a former state Senate president, and Patricia Levesque, a budget advisor to former Gov. Jeb Bush.


House Speaker Marco Rubio, who aggressively lobbied commission members to pass it, said he felt a measure of vindication to see a tax-swap proposal — similar to one he tried to push through the Legislature twice last year — make it onto the ballot without legislative help.

”You’re our last hope because all you have to do is open a newspaper to realize we’re not going to pass meaningful tax reform in the Florida Legislature,” Rubio told the panel before the vote. “I don’t think anything you’ve ever done will be more important than what you do today. I hope you don’t let it be an opportunity to pass you by.”

The West Miami-Dade Republican will be forced out of office later this year by term limits, but lawmakers who attended the meeting and will likely be in the Legislature when it is forced to find the money were less optimistic.

”I hope we think long and hard about this because the number we’re talking about is not as easy to come up with,” Sen. Mike Haridopolos, a Melbourne Republican designated to be Senate president in 2010, said before the vote.

Among the opponents of the measure: The Florida Catholic Conference, which urged the panel to reject the measure, saying a higher sales tax will disproportionately increase the burden on the poor and elderly.


McKay, who worked unsuccessfully for years to get the Legislature to eliminate tax exemptions on what he considers special-interest groups, said he was confident the measure will force the Legislature to expand the sales-tax base.

”Unless we do something here today, probably nothing’s going to be done,” he told the panel. “So it’s up to you to give the voters of Florida this opportunity.”

The proposal will make Florida more dependent on a consumption tax, rather than the property tax that economists say will remain stagnant as the state’s population ages. The amendment would abolish the portion of property taxes that pay for schools, called the Required Local Effort, by the 2010-11 school year. School districts could continue to levy other property taxes that have been approved by local voters.

The amendment requires the Legislature to consider eliminating sales-tax exemptions that do not ”advance or serve the public purpose” — but keeps in place exemptions for food, medicine, rent, electricity and religious institutions — and reducing the state budget by shrinking government.

The amendment would also give businesses, second homes and other properties that do not qualify for a homestead exemption a 5 percent cap on annual assessment increases, similar to the 3 percent cap homesteads now get under the Save Our Homes Act.

But the prospect of opening a debate on tax exemptions worried business leaders, who argued aggressively against the measure Monday. The Florida Chamber of Commerce, Associated Industries of Florida and Florida Retail Federation and the watchdog group TaxWatch said that by forcing such a deep cut the amendment will push legislators to consider taxing services such as accounting, dry cleaning and beauty salons, which are now exempt.


”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.

Opponents are skeptical. During the real-estate boom between 2000 and 2006, yearly revenues from the tax on real-estate transactions rose from $1.2 billion in 2000 to $4.5 billion, but the skeptics don’t expect the real-estate boom to repeat itself.

The Florida School Boards Association told the commission that it will support the measure on the condition that the Legislature come up with the replacement money.

”If they don’t fill the void . . . it would be a budgetary disaster,” said Wayne Blanton, director of the school boards organization. “This forces the Legislature to do what the Constitution says and that is find the money for education.”

Blanton said he expects that debate will re-open the discussions over school funding, equity between school districts and regional differences in the cost of providing an equal education.

Miami Herald staff writers Marc Caputo and Jennifer Lebovich contributed to this report.