Monday, August 18, 2008

Florida's "Nuclear Option"

Advocates of shrinking Florida's government in a bathtub took two body blows last week. First, a state judge sat down (for several hours) with the text of Amendment 5, the property tax amendment voters were set to evaluate this November, and decided that it was too misleading and confusing to live. Second, on Friday the state's bean-counters gave their most recent (and most dismal) economic forecast-- including an estimated $1.5 billion budget shortfall for the fiscal year now underway.

From a fiscal sanity perspective, this is only half-bad news: while a huge new budget hole means nothing but pain for everyone involved, Amendment 5 was a half-baked approach to property tax reform that would probably never have been fully funded, so good riddance to it.

The glass-half-full way of looking at all this is to note that, with the new deficits coming hard on the heels of some gawd-awful budget cuts earlier this year, Florida policymakers will now be forced to put all their options on the table, including some tax hikes that no one has dared speak of so far. And that's the stance taken by Mike Thomas in his Orlando Sentinel column today:
It is time for the nuclear option: a state income tax.
Thomas hits the nail right on the head, in a cursory way, in explaining why this is a sensible thing for policymakers to discuss:
Florida taxes cannot be fixed in their present configuration. They are levied against too narrow a slice of the economy ... The only way to create a stable and fair tax system is a state income tax backed by responsible spending. That diversifies the tax base. It takes the strain off property taxes and lower-income residents. It creates options for dealing with the next big hurricane and resulting insurance crisis.
This isn't rocket science. While most other states are using the so-called "three-legged-stool" approach (property, sales, and income taxes) to raise needed revenue responsibly, Florida is one of the diminishing number of states that is still engaged in a quixotic effort to be "different" from other states by not levying an income tax at all. But as any Floridian who's encountered a cash register or a property tax bill knows, the inevitable outcome of such a policy is that the tax load gets shifted onto homeowners, renters, and consumers. And the property tax and sales tax rates end up much higher than they otherwise would be as a result.

As I've said, this isn't rocket science. A broader tax base means a lower tax rate. And a narrower tax base forces tax rates on the remaining base higher. Similarly, every time the state decides it's not going to tax something-- whether it's personal income or intangible property or sales of consumer services-- the tax rates on everything else have to creep up a little bit higher to make up for the loss.

Is it now, at long last, time for a reasoned debate on the merits and demerits of a "tax swap" that reduces property taxes for fixed-income families while creating a personal income tax? Let's hope so...

1 comment:

Property Tax Assessment said...

What the hell misleading and confusing ...why he gave strain about property taxes...