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AIF WARNS AGAINST TIMING AND MANNER OF McKAY TAX REFORM

December 17, 2001

After reviewing the tax-reform proposal released by Senate President John McKay (R-Bradenton), Associated Industries of Florida (AIF) has decided that it is unable to support the plan.

"We applaud Sen. McKay for having the courage to tackle this issue," said Jon L. Shebel, AIF’s president & CEO, "but we disagree with the means he has chosen to reach his objective. We have pursued tax exemptions in the past that brought economic benefits to the state. We also have never refused to support efforts to change the tax system, but it’s a responsibility that needs to be undertaken calmly and reasonably."

Forcing the Legislature to approach the task through a constitutional amendment will not create an appropriate setting for stimulating rational debate about the economic principles underlying certain sales tax exemptions. Sen. McKay points out that Florida is facing a $4 billion dollar deficit in tax revenues within the next six years. That means that reform of the sales tax system will only be revenue neutral for a short time.

The McKay plan would result in $9.5 billion in lost revenue after repealing certain taxes and rolling back the sales-tax rate from six percent to four percent. Economists predict that the average tax burden on each Florida family would drop by $133 to $150, while tourists would also pay less in sales tax during their visits to the state. That means the bulk of the new taxes would be imposed on Florida businesses.

"We agree with Sen. McKay that there should be a broader base for collection of government revenues," said Randy Miller, AIF’s senior executive vice president, "but at AIF we believe that this can best be achieved by broadening the economic base, not by making more business transactions taxable."

Miller also believes that Florida’s sales tax is not as outdated as everyone assumes.

"It has served us well and it has been updated over the years," Miller said. "Revenue for everyone — business, households, and government — drops during a recession. This time the problem was with the tourism industry. Ten years ago it was construction. Dropping revenues during a downturn is a problem that can’t be solved."

Shebel and Miller agree that there are probably exemptions on the books that no longer make sense. "We need to take a look at these," said Shebel. "AIF agrees with that. But we don’t need to create a false sense of panic by using the constitution to force lawmakers to take on the job."

Associated Industries of Florida is a statewide employers association representing 10,000 businesses that range from large multinational corporations to small family-owned enterprises. AIF is commonly known as "The Voice of Florida Business."