Florida House considers alternative property tax reform plans
 

TALLAHASSEE, Fla. – March 12, 2007 – As troubles mounted Friday for a House Republican push to overhaul property taxes by slashing local government spending, an alternative plan to swap property taxes for sales taxes began to gather steam.

The idea, offered by Democratic Rep. Jack Seiler of Wilton Manors, is to lower property taxes $7.8 billion statewide by eliminating the portion of tax bills that go to school districts. Voters would then be asked to approve a constitutional amendment to make up the lost revenue by raising the state sales tax 2 cents on the dollar.

Seiler’s plan counters the House Republicans’ two-part proposal to roll back local government spending, eliminate all property taxes on primary homes and replace it with a 2.5 cent sales-tax hike.

Unlike the House idea, which would require massive budget cuts, Seiler’s proposal would not necessitate counties and cities scaling back their budgets. But it would shift more of the responsibility for financing education to the state.

“For the past eight years, we’ve balanced the education budget on the backs of local taxpayers,” said Seiler, the ranking Democrat on the House Policy and Budget Committee. “We can’t blame local government for us shifting the cost to local property taxpayers.”

As property values have risen in recent years, legislators increased the percentage local governments had to contribute to the education budget. From 1999 to 2006, the county share of the so-called “required local effort” increased from 40 percent to 55 percent, Seiler said.

Former Gov. Jeb Bush and the Legislature used the savings to cut state taxes, such as the intangibles tax on stocks and bonds.  The new ideas came as House Republican leaders put the brakes on the plan they had fast-tracked this week.

Mounting concerns

They postponed a vote on the plan until Friday as the House Policy and Budget committee heard a mounting list of concerns from business groups, small counties, cities and legislators – many of them Republicans.

Gadsden County Commissioner Brenda Holt told the committee how she watched as her son died in an ambulance because the county has no hospital and he had to be taken more than 20 miles to Tallahassee.

“What do you mean we have extra money?” she asked.

Representatives from small businesses warned that the House plan was rife with unintended consequences. They feared, for example, that if counties are forced to roll back budgets to 2000-01 levels and cut services, the furor would anger people – and counties would respond by overruling the legislation and eliminating the fix, leaving taxes on businesses higher than they are today.

League of Cities lobbyist John W. Smith endorsed Seiler’s idea to have the state pick up the cost of schools that is funded by property taxes.

Hank Fishkind, an economist for the state’s 67 counties, offered a similar alternative: Raise the sales tax 1.5 cents, eliminate property taxes that pay for schools, and increase the tax on documentary stamp taxes paid on real estate transactions.

Seiler acknowledges that raising the sales tax is not universally embraced as the solution. Democratic colleagues see it as a more regressive tax.

Seiler said he would prefer to raise the sales tax 1 cent and find new revenue elsewhere.  His idea was not rejected outright by House Republicans.

Rep. Stan Mayfield, a Vero Beach Republican and vice chairman of the House budget committee, said he likes Seiler’s plan because it relies on an existing formula for distributing tax revenue back to counties.

Under the House Republicans’ plan, sales tax would be collected by the state and then distributed back to counties based on a to-be-determined formula.

Critics warn it would unleash a budget war between counties even more fierce than the annual showdown over school funding.

“It’s going to make that food fight in Animal House look like Breakfast at Tiffany’s,” Seiler quipped.

Inequities persist

Mayfield noted, however, that Seiler’s plan doesn’t eliminate the inequities in the property tax system caused by the Save Our Homes amendment, under which primary homeowners with similar property are taxed at vastly different rates depending upon how long they have owned their home.

Because the House Republican plan contemplates eliminating all property taxes on homestead property, inequities within Save Our Homes would disappear. However, property taxes would still be levied on businesses, rentals and second homes.
 

Copyright © 2007 The Miami Herald,Mary Ellen Klas. Distributed by McClatchy-Tribune Business News.

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