Florida’s taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. swap Amendment 5 is off the ballot, at least for now. Judge John Cooper ordered it removed after concluding that the ballot title was misleading and confusing. The initiative’s proponents are now appealing the removal.
We discussed the swap proposal here:
The amendment calls for the Legislature to remove all property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es levied by school districts by 2010. This would reduce the average property tax bill of a Florida resident by anywhere from 25 to 40 percent.
The amendment states that the lost revenue will be made up in one of three ways: a sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. increase of 1 cent, spending cuts enacted by the state government, or a repeal of sales tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the IRS, preventing them from having to pay income tax. s on items such as food and religious organizations. While critics argue that the sales tax increase and spending cuts will not completely make up the lost revenue, Crist argues that the lower property tax rates will spur investment and economic growth in the state.
Speculation suggests that this new 7 cent sales tax rate will be extended to cover previously exempted services. For example, funeral services are currently tax exempt in Florida, but if Amendment 5 is passes, a $5,000 funeral service will be hit with a new $350 tax.
As we have stated before, tax swaps are not sound tax policy for three specific reasons. First, local control of schools gets shifted to the state level, harming local autonomy. Second, increasing the sales tax is a more problematic source of revenue and makes the state less competitive in relation to rates found in neighboring states. Third, and most importantly, if the swap means a zero net change in revenue, it won’t actually reduce Floridians’ overall tax burden, as they think it will.
Other Florida posts here:
- Florida Governor Endorses Property Tax Swap Amendment, by Sarah Larson, August 6, 2008
- Florida Imposes Tax on Justice, by Joseph Henchman, July 31, 2008
- Multiple-Choice Tax Proposal in Florida, by Will Luther, July 22, 2008
- Charlie Crist: Rest of America Should Subsidize Insurance for Florida, by Gerald Prante, May 31, 2008
- Is TABOR Needed in Florida?, by Gerald Prante, March 21, 2008
- Florida Governor Addresses Property Taxes in State of the State Speech, by Alicia Hansen, March 6, 2008
- Florida Considers Limited Tax Reform, by Joseph Henchman, November 16, 2007
- Florida Moves Towards Property Tax Cuts (Again), by Gerald Prante, October 23, 2007
- Florida Property Tax Amendment Removed From Ballot, by Joseph Henchman, September 25, 2007
- Key Florida Republican Comes Out Against Property Tax Cut Referendum, by Gerald Prante, September 7, 2007
- Florida Governor Crist Tells Realtors to Get Ready for Housing Boom from Property Tax Cut, by Gerald Prante, August 24, 2007
- Florida Property Tax Reform Will Go Before Voters, by Gerald Prante, June 18, 2007
- Florida Property Tax Reform Debate Continues, by Gerald Prante, April 20, 2007
- Florida Latest State Proposing Property Tax Cuts for Sales Tax Increase Swap, by Curtis S. Dubay, February 21, 2007
- Tax Cut? More Like Tax Swap, by Gerald Prante, February 20, 2007