September 07, 2008, Palm Beach Post , Study contradicts notion of an overtaxed Florida, editorial.
When Gov. Crist criticized the Florida Supreme Court last week for tossing the tax-cutting Amendment 5 off the November ballot, he was expressing his own and the prevailing belief that Floridians are overtaxed. Not so, says a national study by the nonpartisan Tax Foundation. According to the group, the local tax burden on Floridians is 47th.
How can that be? Like Nevada, which ranked 49th, Florida shifts taxes to visitors. Florida has no state income tax and relies heavily on the sales tax. In effect, residents of other states have a higher tax burden because they are paying taxes every time they visit Disney World or stay at The Breakers.
The two other states judged to have a lower tax burden than Florida were Alaska and Wyoming. They benefit from taxes on oil and coal production. The states with the biggest tax burdens - New Jersey, New York and Connecticut - all contribute to Florida's low ranking by exporting tourists to Florida.
Admittedly, tax studies can be subjective. But with the death of Amendment 5, the Legislature will have to find ways to fix Florida's distorted tax system. Any change must start from an honest evaluation of how much Florida taxes, and how.
Due to its sheer size, Florida collects the third-highest amount of taxes, slightly ahead of Texas, Census Bureau figures show. Florida, though, ranks 37th in per-person collections, just above Louisiana and Mississippi. Yet Floridians demanded lower taxes. And Gov. Crist responded. At his urging, voters passed Amendment 1 in January. He predicted that the "portability" section of the amendment would rev up the housing market.
Obviously, that hasn't happened. Meanwhile, Amendment 1 dropped property taxes for homesteaders, who already enjoyed big benefits because of the 1992 Save Our Homes tax cap. But owners of commercial property and seasonal homes continue to pay a disproportionately large share of taxes.
When asked to comment on the Tax Foundation study, the governor's office credited the lack of a state income tax and said the governor pushed tax cuts because that's what Floridians desire. But it's not that simple. By continuing to give all the breaks to year-round Florida residents - those with a homestead - but doing little to help the tax burden for second-home owners and tourists, Florida risks driving away the very people who so conveniently assume such a large share of the state's tax burden. That would result in Florida residents paying more taxes, not less.
Amendment 5 would have cut property-tax bills by about 25 percent, but it would have thrown the state's finances into chaos. That cut would have taken $11 billion from schools with no requirement to replace the money after the first year. It also would have increased Florida's reliance on non-Floridians by replacing the money, in part, with a higher and broader sales tax.
So, how can the nation's fourth-largest state get by on one of the lightest tax loads? It can't. Governments at all levels are slashing spending. State universities are overcrowded, most school districts can't afford raises for teachers and Gov. Crist wants to raid reserves just to get through this year. Even as the state tries to diversify through biotechnology, the state economy remains so closely tied to tourism that a travel industry downturn can have a devastating effect.
The study points out that such cost-shifting can backfire when residents of neighboring states get wise. Nobody wants to pay for services they don't get. A new generation of retirees may be less likely to flock to Florida in the age of global warming and more frequent hurricanes. The state's cost shifting is a double-edged sword.
The Tax Foundation study makes clear what Gov. Crist won't face. Florida doesn't have a rational tax system. Continuing to cut taxes for the sake of popularity does nothing to make the system more rational.
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