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Ten Reasons why a Sales Tax Increase isn't Responsible Property Tax Reform
We all agree that the Florida
property tax system is broken. But a quick fix could make the
situation worse rather than better. We believe that a thorough and
deliberate review of any proposed fix is the only responsible way to
approach property tax reform. We also believe the goal should be
property tax reform that’s equitable and balanced.
The following list examines the
consequences of increasing the sales tax to offset property tax
reductions. We hope this list helps you
understand the possible impact of sales tax increases on our
community.
1.
Increasing Florida’s sales tax rate to 9 percent or 11
percent would be
burdensome. Every state that has talked about property tax
reform has looked to sales tax increases to make up the lost
revenue. At some point, sales taxes become so high that people stop
buying or use alternative methods of purchasing that eliminate or
reduce the sales tax. Creating the highest sales tax in the United
States may drive out poorer residents who can no longer afford the
basics of life.
2. Eliminating sales tax
exemptions would produce the same or more revenue than a 2.5 percent
increase in sales taxes. The legislature
doesn’t need to raise the sales tax. There currently are more than
230 exclusions, exemptions, deductions and credits for the sales and
use tax. Reviewing and eliminating a number of these exemptions
could achieve the same goal. Former State Senator John McKay has
been leading efforts to require a thorough review of all sales tax
exemptions to ensure their public purpose, but has not been
successful in this worthwhile effort.
3. This sales tax plan will
require growth to succeed. Sales tax
revenue per capita has been flat or has shown only slight growth for
years – not even keeping up with inflation. The only way to be
sustainable under a sales tax plan is to continue to cut government
services (most general revenue tax dollars go to education, health
care and public safety) or to create an environment to attract more
consumers to the state, further complicating Florida’s growth
problems.
4. This sales tax plan
undermines local government
accountability for spending.
The framers of the Florida Constitution were pretty wise.
They wanted to fund local government services with property tax,
collect it through a local tax collector and spend it through
budgets created by city councils and county commissions whose
members live in the community. Nothing could be more transparent or
accountable. A shift to sales tax makes the state Department of
Revenue the tax collector and makes the Legislature the budget
programmer. Sales taxes collected and distributed by Tallahassee,
under the influence of special interests and regional political
powers, lack the accountability to local communities.
5.
Sales tax revenue is generally redistributed revenue. When
the state controls spending, rather than the community in which the
revenue is collected, money is often redistributed to meet state
funding priorities rather than local quality-of-life priorities.
Some call this "socialized taxation," which creates mediocre local
governments. The shift of revenue from property tax to sales tax
will significantly impact rural communities – communities without
substantial taxable sales transactions. That impact will, in turn,
impact urban areas, which may see their sales tax revenues diverted
to those rural areas. The result is statewide mediocrity. What’s
needed is a tax system that helps communities strive to be
extraordinary, not mediocre.
6.
Sales tax revenue is unreliable because it’s based on consumer
decisions. It’s impossible to plan and deliver high-quality
public services when the revenue available for those services varies
dramatically from year to year. Without a very strong reserve, a
community couldn’t develop and consistently provide a set of
services. For example, the Sheriff’s ability to hire officers
shouldn’t depend on the number of visitors to Sarasota County, how
long they stay and how much they spend. Revenues also would be
affected if higher sales taxes reduce the number of visitors.
7. Florida needs to collect
the tax on internet sales. Florida isn’t
collecting the tax on internet sales of goods. Uncollected internet
sales taxes are about $2.4 billion and internet sales are growing. If
sales tax rates increase by 2.5 percent, consumers are likely to increase
internet purchases – further reducing state sales tax revenue.
Collecting the taxing on internet sales has federal constitutional
implications. Florida needs to support the efforts of other states
by entering an interstate compact allowing internet sales tax
collection. Collecting internet sales tax is necessary to maintain
a competitive environment for Florida businesses.
8.
Community character could be driven by a sales tax policy rather
than sound land use policies. A tax policy based on sales tax
can affect the character of a community. Some states shifted local
property taxes to sales taxes and distributed the sales tax revenue
on a point-of-sales basis. That encouraged cities and counties to
depend on high-volume (big box), high-value (auto malls) businesses
as their primary economic development. While these businesses have a
value in a community, land development driven heavily by tax-base
considerations can have an undesired effect. When our tourists have
to pay an additional 3 percent tax on their stays and at our attractions,
they may go to other lower-cost destinations. The alternative would
be for Florida to create yet another sales tax exemption.
9.
Sales tax is regressive. Sales tax impacts lower-income wage
consumers more than higher-income people. It’s that simple.
Increased reliance on sales taxes has the potential to
disproportionately shift the property tax burden on large value
properties to lower income people. In Florida, the shift is even
more regressive because it removes a potential itemized deduction
from federal income taxes when the sales tax credit on the federal
income tax benefits those with means.
10.
Accountability for government spending. We fully support
accountability for government spending. The Florida Constitution
wisely has a provision for local revenue to come from a local base –
property tax. With many complex expenditure limitations tied to
revenue streams, each local government is able to earmark particular
revenues for particular activities. As a result, it can budget and
plan for the future. We support a legislative “Local Government
Budgeting and Accountability Act,” which would unite local
accounting and budgeting to advance accountability for government
spending at the local level. If some local governments spend
excessively, it affects all of us. We want to be able to police
ourselves by being accountable to our constituents.
You need to hold our leaders
accountable for their proposals and their votes. Elected officials
at both the local and state level are in a position to pass laws
that affect the quality of your life. As citizens, you need to use
your voices to demand that elected officials act responsibly,
thoroughly and deliberately, and that they provide you with a clear
and accurate explanation of their decisions.
Today's changes to the quality
of life impact the next generation – your children and
grandchildren. Protect their future by using your voice today.
Updated 2/27/07
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