Palm Beach Post: Kill property-tax swap; it would hurt Florida

Wednesday, April 23, 2008

Palm Beach Post Editorial
Wednesday, April 23, 2008

If the idea is that a sales-tax-for-property-tax swap will be the crowning achievement of the Florida Taxation and Budget Reform Commission, the commission doesn’t deserve a crown.

The proposed constitutional amendment, sponsored by former Florida Senate President John McKay, started as a backdoor approach to closing sales tax loopholes, a cause that Mr. McKay has championed for seven years. To win support from those who consider his idea a tax increase, Mr. McKay attached it to a proposal that would eliminate 25 percent of the local property tax - the share charged by the state to pay for public schools.

That change would cost $8 billion in revenue statewide. An increase of 1 cent in the base 6-cent sales tax would make up for about half of the lost revenue. The rest, in Mr. McKay’s view, would come from broadening the sales-tax base while continuing to exempt such essentials as groceries and medicine.

That should have happened years ago, but loopholes have lobbyists. So now, after the tax and budget reform commission approved the tax swap a month ago, support is eroding. Some commissioners who thought that budget cuts could make up the rest of the lost revenue now realize that the budget isn’t so flexible. Lobbyists for industries that might get taxed worry that Mr. McKay may get what he wants.

Opponents of the amendment strutted last week before Sen. Mike Haridopolos, R-Indialantic, who expects to be Senate president in 2010. “Should (the tax swap) pass,” Sen. Haridopolos said, “it’ll be the largest tax increase in the history of the state.”

The opposition, buoyed by the defection of one supporter, needs four more votes on the 25-member commission to block the proposal at its final hearing Thursday. The amendment should fail. Replacing property taxes with sales taxes would be unfair, since it would be a new tax for non-homeowners. Raising the sales tax would make it harder if the state had to add to it again to pay hurricane insurance claims. Placing more emphasis on the sales tax at a time when sinking sales-tax revenues are leading to budget cuts seems fanciful.

Finally, the amendment would leave details to the Legislature. Voters would go to the polls in November not knowing how legislators would replace the lost $8 billion, or which sales taxes would be added, or even whether the sales tax would be increased by 1 cent or 2 cents. With property values slumping and the Legislature already cramping local spending, the urgency for property-tax cuts has lessened. That is shown in the opposition to the tax swap by business owners. They would benefit from eliminating $8’’billion in property taxes, but they prefer to keep the property tax.

By tying a good idea to a property-tax cut, Mr. McKay may have thought that he could find ideological soulmates. He wants to widen the state’s sales-tax base in the worst way. The worst way, though, is not how Florida should do it.