Florida: Tax Swap or Tax Flop?

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Virtually every business group in Florida, with the exception of realtors, has joined tax fairness advocates in opposition to the proposed Amendment 5 on the November ballot. Amendment 5 would eliminate most state property taxes for schools, costing them about $9.5 billion a year, in exchange for a 1 percentage point increase in the state sales tax. The sales tax increase would only bring in $4 billion a year at most, not enough to fill the gap left from the loss of property tax revenue. The amendment does require the state to appropriate another $1.5 billion towards education using other revenue, but educators are rightly suspicious that lawmakers might not live up to this promise. Even if they did, there would still be a gap of a few billion dollars at least.

Most business interests oppose the amendment because they fear the sales tax increase will hurt their profit margins. Realtors clearly believe lower property taxes will raise home sales. The last public policy initiative they backed for this purpose, "portability", a part of Amendment 1 that was approved in January, failed to mitigate the housing crunch.

There are plenty of reasons to oppose the amendment that have nothing to do with profit margins. It is unwise to shift from property taxes to sales taxes in the midst of a recession. Sales tax revenues are strongly linked to economic cycles and they are not a reliable source of income during an economic downturn. Moreover, the sales tax is a regressive way to raise money and will hurt the poor the most at a time when they can least afford it.

Finally, leaving a future source of revenue undefined is an invitation for more deep cuts for public services at a time when states are already facing serious budget shortfalls. The legislature just passed a state budget $6 billion smaller than the year before, followed by an additional 4% across-the-board cut. This leaves vital public services vastly under-funded at a time when they're needed most.

Amendment 5 shifts the state's fiscal burden to lower-income people and also threatens to tear a bigger hole in the system that funds education. It's a step backwards that Floridians should reject.

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