BHI News STAMP analysis informs debate on Florida tax reform

from NewsLink, Vol. 6, No. 3, Spring 2002 Last February, the Florida House of Representatives turned back a sales tax overhaul that would have eliminated 35,000 jobs and cost $1.3 billion in payroll according to BHI’s State Tax Analysis Modeling Program. By an overwhelming 99-0 margin, the lower chamber defeated a plan by Senate President John McKay that would have cut the state sales tax but would have also eliminated dozens of exemptions. Not a single House member spoke in favor of the proposal. In addition, Governor Jeb Bush opposed the tax plan. At the invitation of the House leadership, David G. Tuerck testified against the tax package outlining the dramatic loss in jobs and payroll. The McKay plan would have imposed a levy on nearly 1000 items and services currently exempt from Florida’s 6 percent sales tax such as legal work, accounting and shipping. Proponents argued that the tax plan, which proposed lowering the rate the rate to 4.5 percent, would have enabled the state to expand its tax base to cover more services not currently taxed. However, the plan also poses a threat to the Florida economy. Despite its claim of revenue neutrality, the proposal would double-tax certain services such as accounting. “It seems impossible for me to believe this bill is revenue-neutral,” said David Tuerck, BHI Executive Director who testified before the legislature on February 20. “It’s quite a nice tax increase for Florida households.” The BHI analysis also found that the proposal would have raised the tax burden on all Florida households and would be especially regressive since it would fall harder on low-income households. Tuerck also suggested Florida’s competitiveness rating in the BHI State Competitiveness Report 2001 would improve if it cut taxes rather than raised them. Florida ranks 36th overall.

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