Florida Voters May Decide on ‘Tax Swap’ Plan

Published September 1, 2008

Floridians might have the option this November to vote to cut property taxes by raising other taxes, depending on the outcome of a lawsuit that has been filed to block the referendum.

Amendment 5, the Property Tax Swap Amendment, would reduce property taxes 25 percent. Other taxes would increase, including a rise in the state sales tax from 6 percent to 7 percent. Critics, including some advocates of lower property taxes, say the tax swap would end up being a huge tax increase.

On July 3 a coalition of Florida organizations–including the Institute of Certified Public Accountants and the Florida Farm Bureau Federation–filed a lawsuit to prevent Amendment 5 from appearing on the ballot.

“The main problem, when you do all the math, is there’s a tax increase. There’s an $11 billion mandate, and only $7 billion in tax relief,” said state Sen. Mike Haridopolos (R-Melbourne), the Florida Senate’s lead opponent of the amendment. “That’s a $4 billion tax increase; plus the business community has no idea what this would be like in two years.”

Reform Commission Wanted It

Amendment 5 follows recommendations by the Florida Taxation and Budget Reform Commission (TBRC), which meets every 20 years. Robert Sanchez, policy director at the Florida-based James Madison Institute, is familiar with Amendment 5 because one of the institute’s board members served on the committee.

He said critics of Amendment 5 make a valid point when they note the legislature already has the authority to shift school funding from local property taxes to state sources such as the sales tax. Having Amendment 5’s mandate “chiseled in stone” in the state constitution would deny future legislators the flexibility they may need to address changing situations, Sanchez said.

Sanchez also noted the reason for high property taxes is simple–local governments are spending too much. Amendment 5 would not address the spending problem, and it would muddy the state’s tax system, Sanchez says.

“Sound tax policy is characterized by simplicity and stability, typically found when there is a broad tax base and low tax rates,” Sanchez said. “Amendment 5, though perhaps a well-intentioned effort to address voters’ concerns over high property taxes, seems unlikely to advance those principles.

“If it led to the taxing of ‘services,’ such as those generally found in home-building, for instance, the result would be additional complexity [to avoid the pyramid effect of taxing taxes],” Sanchez explained.

Spending Presents ‘Fatal Flaw’

Barry Poulson, head of the Fiscal Discipline Project at the University of Colorado, also opposes Amendment 5 and agrees control of government spending is essential.

“The fatal flaw in Florida taxes is unconstrained growth in expenditures, particularly at the local level,” Poulson said. “Local officials still don’t get it. The Jacksonville Journey [an anti-crime initiative in Jacksonville, Florida] proposes $250 million in increased property taxes to fund increased spending for crime prevention. Jacksonville already has the 13th highest property tax burden among major U.S. cities.

“It is this failure on the part of elected officials to rein in increased taxes and spending that has led the Americans for Prosperity Foundation to support a Taxpayer Protection Amendment that would impose limits on the growth in taxes and spending,” Poulson continued.

The Taxpayer Protection Amendment nearly got on the ballot through the TBRC, Poulson said. Supporters are now working to enact it through voter initiative.

Realtors Want Amendment

Amendment 5’s most ardent supporters may be members of the Florida Association of Realtors.

Trey Price, an association lobbyist, said, “Schools will still be funded in Florida–and held harmless–under Amendment 5. This is simply a different and fairer way of funding our school system. … Currently, property owners pay a disproportionate share, compared to renters, for our schools. Also, property owners who pay for private school must also pay this tax for public schools.”

Price said, “Florida’s sales tax system is riddled with over $23 billion in loopholes, and those exemptions should be reexamined for legitimacy. Amendment 5 will force the legislature to look at those exemptions, such as ostrich feed, luxury skyboxes, and others, to see if they still stand up to real scrutiny.” He said the state could raise more money by increasing the tax on cigarettes and collecting sales taxes on purchases made over the Internet.

Property Taxes Precede Vote

Sanchez predicted Amendment 5 will lose if it ends up on the ballot.

“Given Amendment 5’s many uncertainties and other perceived flaws, and given the impressive array of opponents from all across the political spectrum, it is doubtful that Amendment 5 will receive the 60 percent of the vote now required to pass a constitutional amendment–even though most Florida voters still smarting from high property taxes amid falling property values will be receiving their property tax bills for the coming year just a few weeks prior to election day,” Sanchez said.

Krystle Russin ([email protected]) writes from Austin, Texas.