Florida is projected to have a $6 billion shortfall for FY2011. Given this deep financial hole it would probably make sense for lawmakers to investigate ways of raising taxes.

Instead, the Florida legislature has voted unanimously (115 to 0 in the House and 39 to 0 in the Senate) to increase existing tax credits and create some brand new ones. Governor Crist is expected to sign the bill into law.

The tax credits are even more audacious than what we've become accustomed to seeing from the more conservative state legislatures. The crown jewel of the package is a new tax credit that caps the sales tax on yacht purchases to $18,000. Keep in mind that the sales tax would not exceed $18,000 unless the cost of the yacht was greater than $300,000. In other words, this is a tax credit that benefits only those who purchase a yacht worth more than $300,000.

The package includes other gems, like credits for film and TV production. The total cost of the package of credits is estimated to be around $200 million over three years.

But given how difficult it can be to project the cost of tax expenditures (government subsidies provided through the tax code), that cost could easily be much more. As we reported last week, a recent State Auditor report in Missouri found that credits in that state unexpectedly cost an additional $1.1 billion (above and beyond what was originally projected) between FY2005 and FY2009.

Surely, there are better ways for the state to spend hundreds of millions of dollars, but it's likely that the yacht construction, film and television and other favored industries would disagree.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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