February 11, 2002
The House of Representatives
"At the outset, I would like to commend Senate President McKay for his boldness and courage in developing a proposal on what he perceives as Florida’s tax dilemma. As Theodore Roosevelt said, ‘Far better to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much because they live in the gray twilight that knows not victory or defeat.’ Although I believe President McKay’s proposed tax changes are well intentioned, I believe that the overall effect on Floridians would more likely be harmful than helpful. In coming to my own personal conclusions, I intend to vote no. I believe Senate President McKay’s proposal is the wrong medicine for anything that might ail Florida’s system.
This past week I received Governor Bush’s letter regarding the Senate’s tax proposal. Governor Bush pointed out that Floridians deserve a committed effort from the Legislature to find better, smarter, more efficient ways to accomplish our priorities, rather than requiring our hard-working citizens to give an ever-increasing portion of their income. He also articulated a shared concern of mine about the impact the Senate proposal would have on Florida’s ability to continue to attract job-creating business investment. I find myself in agreement with the Governor in the conclusion that Florida’s current sales tax structure is adequate to finance Florida’s revenue needs for the foreseeable future.
The Governor engaged in a thoughtful and well-reasoned review of President McKay’s proposed changes to Florida’s tax structure and addressed several complex questions concerning the potential advantages and disadvantages for Florida’s economic growth. As I sought to answer many of the same questions, I asked the House of Representatives to engage in a thorough review of President McKay’s proposal. To that end, I appointed a bi-partisan "Select Committee on Florida’s Economic Future" which has drawn thousands of observers and participants throughout the state. Although individual members will reach their own conclusions on the necessity or merit of the Senate’s tax proposal, I am committed to having a debate and fair vote on the floor of the Florida House.
Without reiterating arguments already made, or that maybe elaborated upon subsequently by the Select Committee’s report, I believe my own personal review of Florida’s tax structure suggests a number of conclusions.
Hard statistics show that future revenue from existing taxes will keep up with the rate of gross state product and personal income.
If our tax system is not broken, why break it?
Turning the massive and extraordinary tax plans and changes in the Senate tax bill, critics have pointed out a number of dangerous problems it creates for individual Floridians and our state as a whole. To this point, several additional concerns lead to my opposition to the plan.
Dr. Hank Fishkind, economist to the Florida Senate, testified before the House Select Committee that some 300,000 – 400,000 Floridians would have to begin compliance measures and add administrative duties of collecting taxes on services they provide to their workload. Plumbers, tile setters, barbers, coin laundry operators, lawn service companies and hundreds of other professions will need to become tax collectors. Bureaucratic headaches will be poured on small businesses in Florida.
The estimated cost of compliance for all these new tax implementations is $400,000,000 a year. This cost is in addition to new taxes the plan implements. We must always remember that people, not businesses, pay taxes and any new taxes on services will inevitable be passed on to the citizens of Florida.
In the proposal, tourists appear to save over $300,000,000 in taxes the first year, but Florida’s families and businesses will make up the difference, meaning a $300,000,000 tax increase to Floridians in year one.
In future years this plan turns into the largest tax increase in Florida’s history, leading to bigger government and more spending. This will hurt job growth, hurt economic development, and hurt Florida’s future.
Dr. Fishkind admitted yesterday that this plan would do nothing to offset recessions. I have, with supportive studies, said repeatedly the empirical evidence is that Florida’s tax structure provides sufficient funding to meet Florida’s spending needs.
Another enormous problem under this plan is tax pyramiding, or tax cascading. Even tax free goods like groceries will be taxed before sales to consumers. Grocers use transportation, accounting services, legal services, consultants, engineers and other services that would be taxed under President McKay’s proposal. As grocery chains are taxed on these services for the first time, will they raise food prices to hold profit margins? Of course so.
And on non-exempt items such as automobiles, washers, and televisions the increase in costs to manufacturers, transporters and retailers will increase the price of products. Product prices will increase by more than 1.5% I believe, which is the proposed sales tax rate reduction, for many if not most goods. Dr. Fishkind suggests families may save on taxes under the plan, but businesses will pay more. Business, he admits, pass on tax increases to consumers whenever possible, resulting in no net savings to Florida families. Again, people pay taxes, not businesses.
Where businesses cannot increase costs to consumers, they may close or move to other states. Dr. Randy Holcombe suggests that the proposal’s effect on Florida’s competitive advantage would be severely damaged. We should be grateful to employers for making a Florida number one in job growth. Instead, this plan punishes employers and slows job growth.
Even if these tax policy plans were positive, tax and fiscal policy should not be micromananged and embedded in perpetuity in Florida’s Constitution. The legislative process is the place to tailor tax policy to current needs and trends. I do believe the constitution is designed to protect individual citizens from overreaching government. Also, with the Task Force on Tax Reform’s recommendation, I believe that "effective limitations on state spending" is appropriate and necessary for Florida’s future.
Business leaders around the state, after reviewing this tax plan, oppose it without exception. The Council of 100, Tax Watch, The Florida Chamber of Commerce, and the Task Force on Tax Reform all unequivocally conclude this plan is bad medicine for Florida’s future.
In the Florida House, we are not afraid to debate big ideas. President McKay’s plan is certainly big and he should be congratulated for brining it forward.
But we resolve big questions based on fundamental principles, including advocating less government and less taxes. This plan, in my view, raises taxes and increases government. Even professor Fishkind admitted describing the plan "If one wants to call that a tax increase, so be it. That’s always been the program."
Most importantly, it hampers business growth, economic development, private investment and job growth – a prescription for disaster. Personally, I do not promote increased taxes and broader tax bases; I advocate increased prosperity and a broader economic base.
When it comes to wholesale changes to our tax system, we especially need to remember John Marshall’s words that ‘The power to tax involves the power to destroy..."