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.
- Florida’s fundamental
tax structure is not substantially flawed.
- Floridians are not
- Florida’s job growth
leads the nation, due in part to the state’s favorable tax code.
While the United States as whole lost jobs in 2001, Florida increased
job growth by 138,000.
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
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
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
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..."
You can contact the
Speaker via email or
Room 420 The Capitol, 402 S. Monroe St., Tallahassee, FL 32399-1300
P.O. Box 622109