Property Tax Repeal? Jacksonville Sun Advises "Caution"

Reaction to the Florida House Republican leadership's latest property tax "reform" proposal-- repealing all homeowner property taxes-- continues to find a skeptical audience among state media outlets. The Jacksonville Sun's editorial board weighs in on Sunday's op-ed page, and they've got good questions for advocates of repeal:

But how would local governments absorb the lost revenue and how would their tax distributions be sorted out?
Would becoming the highest sales-tax state in the nation discourage tourists or drive business to border states or to the Internet?
What about the hit on the poor from a sales tax increase?

These are all legitimate and well-stated concerns. The most likely answers to these questions are "With difficulty," "Almost certainly," and "The poor will pay more."

The Sun has its own broad recommendations that generally focus more on goals than on strategies:

More fairness: The property tax benefits are tilted too far to those who have been in their homes the longest. Some longtime home-owners pay no property taxes at all.
More balance: Businesses and other nonhomesteaded property owners are getting rocked with higher taxes. Some type of reasonable cap is in order that protects them but allows for moderate growth in tax revenues.
Consideration for local governments: State and federal governments, meanwhile, are shifting costs to the local level. Most governments have room for belt-tightening, but beware of placing one-size-fits-all limitations on local government spending.
More moderation: Officials must be careful not to make fixes that are worse than the problem itself. Officials should phase in changes so that adjustments can be made.
More information: Taxes are complicated. Floridians need as much analysis as possible to understand how any changes would affect them, businesses, local governments, schools and the state overall.

These broad goals are all right on. The question is, when will anyone with a voice in this debate start talking about the forgotten reform option-- enacting a personal income tax?

Tallahassee Democrat Calls for Comprehensive Tax Reform

It's the sort of sentiment that is so obvious, it shouldn't even be notable. But at a time when Florida lawmakers' tax-reform priorities begin and end with the property tax, it's nice to hear a reminder that there's more to it. An editorial in Friday's Tallahassee Democrat cautions against focusing just on the property tax picture:

What's really needed is a comprehensive review of Florida's tax system - not only property taxes, but also the hundreds of sales-tax exemptions totaling multibillions of dollars. That requires strong political will, not just sound bites.

The sales tax, of course, is only one part of the larger picture, and the Democrat doesn't really connect the dots to explain why such a reform should go hand in hand with property tax cuts. [The answer: state lawmakers have made an art form of sloughing off funding responsibilities to local governments, and have used the resulting "surplus" revenue to enact unaffordable tax cuts. So a necessary part of local property tax reform will be reinvigorating state-level taxes, including (but not limited to) the sales tax.]

And it would be nice to hear a word or two about whether reforming the state's loophole-ridden corporate tax or enacting an income tax might be a solid option. But kudos to the Democrat for keeping their eye on the big picture.

"Myths and Facts" About Tax Reform

The Palm Beach Posts's Randy Schultz fires off a salvo at those who are mischaracterizing the Florida tax reform debate--running through a list of tax "myths" and skewering them with a succint explanation of the facts behind the myth-- and hits (mostly) on all cylinders.

Here's my favorite, not least because it's probably the single most important thing to know about this year's debate:

Myth: The government spending problem is all local, and none of it is the Legislature's fault.
Fact: The state regularly pushes costs, such as juvenile justice, onto the counties. And part of what the school district must levy in property taxes is ordered by the state. The share of state money for schools has been shrinking in recent years, while the local share has been growing. That's how the Legislature can claim to be spending more on schools without raising taxes. If the state wanted to help local government, the state would pay its costs, not dump some of them.

Darn right. The state government has enacted unaffordable tax cuts and paid for them by cutting aid to local governments-- basically daring locals to make the unpopular tax hike decisions state lawmakers have fled from. That, in a sentence, is why property tax administrators are feeling state homeowners' ire.

And here is my least favorite:

Myth: Creating a state income tax would solve the problem.
Fact: Voters would have to change the state constitution, and that isn't going to happen. Not that the idea wouldn't improve the system. Under Save Our Homes, the more expensive the house, the more the owner's increased value is sheltered from taxes. An income tax would be fairer than the current property tax system, but Florida will have an income tax when the University of Florida drops football.

There may be a huge political hill to climb before an income tax can be adopted, but that doesn't mean that the income tax solution is a "myth." Rather, that means that the income tax reform is (for lawmakers) an "inconvenient truth," to coin a phrase. Saying a solution isn't politically feasible doesn't make it any less right.

Read the whole op-ed here.

McKay Tapped for Tax Commission: A Good Pick

Governor Bill Crist has made his appointments to the state's Taxation and Budget Reform Commission. Crist's 11 nominees to the commission (the legislature has already appointed 18 members) include one especially notable former lawmaker: John McKay, who as a state senator pushed hard for unpopular but necessary reforms in the state's sales tax.

The Commission is not the result of yet another vague legislative call for "further study" of tax issues-- it was actually created through a constitutional amendment in 1988. Every 20 years, the commission meets to discuss and recommend needed changes to Florida's tax and budget system. The commission can't enact any changes, although it can recommend constitutional ballot changes to voters. The Tampa Tribune's Catherine Dolinski has more on the creation of the Commission-- and what to expect from its deliberations this year-- here.

A skeptic might see the Commission is offering political cover for lawmakers who don't want to make tough choices. And there's probably some truth to this criticism. But if it takes an unelected commission to recommend the difficult choices that elected officials don't have the guts to make on their own, well, that's better than complete inaction. Let's hope lawmakers can at least find the courage to follow up on the Commission's recommendations.

St. Pete Times Ed Board: "Aim For Tax Fairness"

In yesterday's St. Petersburg Times, the editorial board takes aim at pretty much every major property tax reform proposal out there-- and finds them all wanting.

Doubling the $25,000 homestead exemption, as Governor Bill Crist has suggested? Inequitable.
Expanding the "Save Our Homes" property tax cap? Also inequitable.
Capping local revenue growth? Hurts local governments.

The Times' diagnosis on each of these points is absolutely right. And they correctly point the finger at state government, not local governments, as the main culprit in Florida's unfair tax system. The editorial's headline, "Aim For Tax Fairness," gives one hope that the Times ed board might come up with some real suggestions for reforming the state's tax system. And they do mention one state revenue-raising option-- expanding the sales tax base to include more services.

But there's so much more to talk about. The single most obvious option for making Florida's tax system more sustainable and less unfair-- enacting a personal income tax-- is mentioned nowhere here. Nor is there a word spoken about eliminating the variety of loopholes in Florida's corporate income tax.

These options may not be politically realistic right now-- but the whole point of the Times editorial is that the "realistic" options being thrown around by Florida lawmakers right now are simply inadequate to the task at hand. It's the job of folks like the Times editorial board to discuss what's best for the state-- not just what's immediately feasible.