TALLAHASSEE, Fla. (AP) – March 19, 2008 – The idea of taxing services, which could include everything from hair cutting and lawn mowing to lawyering and accounting, may have new life in Florida.
It’s one of several sources, including a sales tax increase, the Legislature could tap to replace at least $8 billion in property tax cuts for schools if voters approve a proposed constitutional amendment, although supporters have played down that option.
That’s not surprising because the concept of a service tax has a tortured past in the state – one was passed and repealed within months about 20 years ago. Plenty of influential opponents including most of Florida’s business interests are also opposed to the idea.
They were unable, though, to prevent the Taxation and Budget Reform Commission on Monday from voting to put the proposed amendment, which would cut property taxes about 25 percent, on the November ballot.
Commissioner John McKay, a former Florida Senate president, sponsored the amendment and House Speaker Marco Rubio, R-West Miami, twice appeared before the commission to support the measure Monday.
Both, though, later said they didn’t think it necessarily would lead to a service tax as argued by the opposition, which includes the Florida Chamber of Commerce, Associated Industries of Florida and the Florida Retail Federation.
McKay, a Bradenton Republican, and Rubio say the amendment would so strongly stimulate Florida’s economy that the present 6 percent sales, a 1 percentage point increase the amendment would allow and other existing taxes would generate enough new income to replace the lost school dollars.
“You can’t conclude that it’s going to be service taxes,” McKay said. “Anybody that does that carte blanche is just trying to muddy the water and trying to discourage people from getting a cut in their property taxes.”
Rubio said opponents are looking at Florida’s economy today, not what it would be in the future if voters adopt the amendment.
“They’re not understanding what’s going to happen to our economy when you give people thousands of dollars back in their pocket to go out and spend,” Rubio said.
McKay, though, has spent 10 years trying to broaden the state’s tax base by eliminating sales tax exemptions and exclusions, including those for services, arguing that they benefit special interests at the expense of all taxpayers.
Service tax advocates say it would shift tax burden to businesses and wealthier citizens and away from poor people who seldom hire a lawyer, accountant, architect, landscaper or limousine service.
Rubio’s focus has been on making deep cuts in property taxes, especially for homeowners, even if that means increasing sales tax.
Both concepts merged in the proposed amendment that the commission passed 21-4 even though it had earlier shown an aversion to a service tax.
A commission committee removed a provision from the amendment that would have required the Legislature to consider a service tax, although it stopped short of prohibiting one. A stand-alone measure that would have required the Legislature to take another look at the concept also died in committee.
The critics say there’s no way that repealing sales tax exemptions on such items as bottled water and stadium skyboxes and the penny-per-dollar increase would raise enough money to replace the school revenues. Together those two options have been estimated at less than $6 billion.
Randy Miller, executive vice president of the Florida Retail Federation, was one of the commissioners who voted against the proposal.
“We’re not talking about cutting any taxes,” Miller said. “What we’re talking about is who pays it.”