Property Tax Crisis - Still No Solution

Transcription

1 Property Tax Crisis - Still No Solution The 2007 legislative session came and went without a consensus on how to solve the property tax crisis. During the last week of session, Senate President Ken Pruitt and Speaker of the House Marco Rubio announced that the Florida Legislature would suspend all negotiations on property taxes and return to Tallahassee for a special session, June 12-22, to fi nd a solution to the property tax crisis. The announcement followed on the footsteps of the release of a new Florida TaxWatch research report on the economic impact of the property tax/sales tax swap proposal. The report found that increasing Florida s sales tax rate in order to reduce property taxes would leave Floridians with less money in their pockets, cause businesses to produce fewer goods and services, and result in a large loss of jobs. It also found that a simple roll-back of property tax rates would boost the state economy and personal income. Florida TaxWatch and the Florida State University Center for Economic Forecasting and Analysis jointly conducted the research. The Research Report, Model Predicts Florida Economy Will Gain By Property Tax Cut Without Changing Sales Tax, compares the predicted economic impact of lowering property taxes through a rate rollback with the economic impact of decreasing the property tax with a corresponding increase in the sales tax rate. Florida TaxWatch Recommendations After conducting research, Florida TaxWatch also presented its own recommendations on how to solve the property tax crisis. Even though the Legislature is feeling a lot of pressure to do something about property taxes this year, Florida TaxWatch recommends that lawmakers provide relief now and allow the constitutionally created Taxation and Budget Reform Commission to tackle true reform by performing a more thorough, thoughtful and deliberative study of Florida s property tax and local government spending crisis. The March 2007 Florida TaxWatch report, The Property Tax Crisis: Legislature Should Focus on Providing Immediate Relief to All Taxpayers, made several recommendations to the Florida Legislature on how to provide statutory property tax relief now, and long term, constitutional reform later. Florida TaxWatch recommendations include: The study used the REMI econometric model, which is a dynamic input-output model to measure changes in consumer and producer behaviors and their impacts on the state Gross Regional Products, real disposable personal income, employment, population growth, relative cost of production, and a few other economic indicators. The REMI model measured both short-term (one year) and long-term (fi ve year) effects of changes in property and/or sales tax under different scenarios. The model predicts that a reduction in property tax with no change in sales tax will boost the economy by increasing both Gross Regional Product and disposable personal income without creating a significant number of job losses. However, the model predicts that a property tax/sales tax swap would decrease Gross Regional Product and disposable personal income and trigger a large and growing loss of jobs for Floridians. (Continued on Page 2) Similar to a previous House of Representatives property tax reform plan, Florida TaxWatch recommends that the Legislature require local governments to roll back their taxes. Florida TaxWatch suggested cities, counties and special districts roll-back their taxes for next year by the lesser of 10% or a two-year roll-back of rates (adjusted forward for population and infl ation), providing taxpayers a tax cut of approximately $1.8 billion. Florida TaxWatch advises that the 2007 Legislature should buy down the Required Local Effort (RLE), the millage rate levied by school districts that is required by the state to participate in Florida s school funding program. During the last several years, the state has failed to suffi ciently roll-back the RLE millage rate, while property values have continued to soar. The RLE is a signifi cant portion of Floridians increasing tax burden and if reduced by $1 billion will provide $1 billion of direct relief to all taxpayers. Businesses in Florida have been the biggest bearers of the property tax increases. Florida TaxWatch has been a proponent of and commended the Governor for recommending that small businesses be exempt from tangible personal property tax and recommends that the Legislature create a $25,000 exemption for tangible personal property tax. The Legislature can also provide enhancement to improve the accountability and transparency of the Value Adjustment Board Process and Truth-in-Millage notices. Celebrating 28 Years of Improving taxpayer value, citizen understanding and government accountability

2 Property Tax Crisis - Still No Solution (Continued) The study, which contains different tax and timeline scenarios, also predicts that a property tax cut will attract more people to Florida and increase demand and output in the economy, while a sales tax swap and rate hike will decrease population growth and result in a corresponding reduction in demand and output. Among the examples in the report: property tax cuts of $2 billion with no change in the sales tax will add $470 million to Gross Regional Product and $1.69 billion to real disposable income in the fi rst year. However, a one percent increase in sales tax to offset a comparable property tax cut will reduce Gross Regional Product by $940 million and real disposable income by $140 million. The property tax relief will result in a loss of 9,740 to 46,990 jobs in fi ve years, while a property tax/sales tax swap will cost 34,410 to 147,170 jobs during the same period. Throughout the 2007 legislative session, Florida TaxWatch produced sound, scientifi c research to help legislators create meaningful property tax reform. Another report, Mixed Benefits from Proposed Property Tax/Sales Tax Swap, analyzed the fi nancial impact on various Floridians of the proposed property tax/sales tax swap proposed by the Florida House of Representatives. Our research has found that nearly all individuals living in homesteaded property will benefit from a property tax/sales tax swap. However, individuals who live in rental properties will be adversely affected by the property Rising property taxes have been the number one issue on the minds of Florida TaxWatch members at regional meetings, such as this one, in Bonita Springs. Here Dominic M. Calabro, President of Florida TaxWatch, presented Florida TaxWatch Board Member David Hart, VP of Government Relations for WCI Communities, who served as Regional Chairman for our Southwest Florida Regional Luncheon and Briefing on April 18, with a token of appreciation, after a good discussion about possible solutions to the property tax crisis. tax/sales tax swap. The report showed the affects of the proposal on Floridians in specifi c Florida cities as well. In past research publications, Florida TaxWatch has suggested that the Florida Legislature focus on providing immediate property tax relief for Florida taxpayers this year by rolling back the millage rate and buying down the state Required Local Effort for public schools. Florida TaxWatch continues to caution that longer-term, constitutional changes that attempt to fi x inequities created by Save Our Homes should not be proposed until all the legal and economic ramifications of such changes be identifi ed, as well as how addressing those inequities would impact all taxpayers. The newly appointed and functioning constitutional Taxation and Budget Reform Commission is positioned to assist the Legislature by fully evaluating all of the property tax reform options. Then, a sound and popular package can be developed that will be fair to all taxpayers, help keep future tax increases in check and create a system that is good for Florida s competitiveness and economic vitality. Florida TaxWatch continues to urge Florida s legislators to use the fi ndings from its research reports to facilitate negotiations on pending tax relief and reform legislation. Florida TaxWatch will continue to follow the property tax debate and provide research to assist legislators in the upcoming special session. Visit the Florida TaxWatch property tax crisis webpage to view research and updates on Florida s property tax crisis. Florida s Communications Services Tax Florida has one of the highest tax rates on communications services in the nation and that rate is much higher than the sales tax rate on other retail purchases in Florida. Both the Florida Senate and House of Representatives introduced bills to cut the Communications Services Tax. Knowing that Florida has the third highest tax rate in the nation on wireless phone service and the seventh highest tax rate on landline phone services, there is question on the fairness of the tax rate on consumers and its effect on the competitiveness of Florida businesses and the attractiveness of Florida s economic culture. Florida TaxWatch recently completed a Briefi ng on the Communications Services Tax, Legislature Should Provide a Meaningful Reduction in the State Communications Services Tax, that encourages the Legislature to find the money to pass a reduction in the Communications Services Tax, of at least 0.25%. Although the House of Representatives unanimously approved a 0.25% reduction in the state s retail sales tax on communications services, it was bogged down in the Senate and no legislation was passed this session. 2

3 Highlights of the 2007 Legislative Session While Property Tax Relief was the main priority for Florida TaxWatch this legislative session, we followed several other pieces of legislation. Here are highlights of the legislation that passed and failed in the 2007 Legislative Session. Legislation That Passed Back to School Sales Tax Holiday There will be another sales tax holiday for books, clothing, footwear, wallets and bags that cost $50 or less, and school supplies that cost $10 or less. The holiday will run from August 4-13, 2007 and will save taxpayers $46.6 million. Hurricane Preparedness Sales Tax Holiday The Legislature created a 12-day sales tax holiday on hurricane preparedness items. The holiday will run from June 1 to June 12 and will cost a total of $24.4 million. This has already been signed by Governor Crist. Merit Pay for Teachers The Merit Pay Award Program for Instructional Personnel and School-Based Administrators bill lays to rest the ill-fated STAR merit pay program and replaces it with a broader based more fl exible program that has a long-range potential to reward any school district employee meeting predetermined performance standards. As one of the Governor s priorities, he signed this legislation early. Corporate Income Tax Piggyback This conforms Florida s corporate income tax code to the federal code by picking up annual changes. Florida TaxWatch supports this annual bill that makes tax compliance less burdensome for businesses and enforcement easier for the state. Cable Franchising Opens Florida s cable market to telephone companies, allowing them to petition the state for cable and Internet franchises. Previously, cable companies have had to strike deals with local governments. Cable companies can now break their local contracts for a state contract. Local governments could lose $19 million from these contracts. Legislation That Failed Communications Services Tax Reduction Although the full House unanimously approved a 0.25% reduction in the state s retail sales tax on communications services, it bogged down in the Senate. Florida TaxWatch released a report, calling on the Legislature to enact a cut of at least 0.25%. (See page 2 for more details.) Taxation of Title Insurance Premiums This legislation was designed to address an inequity in the way these premiums are taxed. Currently, title insurers are taxed on 100% of the premium paid by the customer, while they only actually receive 30% of the premium. The independent title insurance agent retains the rest. While the insurer is never in possession of this portion, they are liable for the insurance premium tax on it. The legislation would make it clear that the tax does not apply to the portion retained by the agents. Florida TaxWatch released a Briefi ng that concluded that the proposal would be a fair and proper way to acknowledge the unique nature of title insurance and the expenses that make up the premium. Taxation of Other Tobacco Products This bill would have changed the way Florida taxes moist smokeless tobacco (snuff) from an excise tax based on wholesale price to one based on weight. Most excise taxes are unit-based. Florida TaxWatch appeared before the Senate to discuss a report, Legislature Should Consider a Unit-Based Tobacco Products Tax, we released last session that found that there were benefits of changing to a unit-based tax. The Budget The state s new budget for FY totals $72.0 billion, about $1 billion less than current year spending. It leaves $2 billion in reserve. Budget writers also claim this is the fi rst budget in recent history that spends no non-recurring revenue on recurring expenses. Some highlights: A $1.2 billion increase for public schools, representing a 6.7 percent per-student boost that yields an average of $455 more per-student statewide. A voluntary pre-kindergarten program increase of $376 million, or $117 per student. A 5% tuition increase for colleges and universities. No pay raise for state employees, but they will receive a one-time $1,000 bonus. The budget does not include $37 million, recommended by the Governor, to stockpile fl u vaccines. In perhaps the most perplexing move this session, the education budget includes a $545 million property tax increase, as legislators hike school property taxes through the Required Local Effort. They then used the same type of language to defend the increase that they have been critical of local offi cials for using to defend their tax hikes. And despite earlier rhetoric that there was no money for them this year, the budget is chock-full of member projects. Florida TaxWatch has begun its annual Turkey Watch and will be providing the Governor with a list of appropriations that deserve his veto consideration later this month. 3

4 Ensuring Local Government Charters are Accountable, Full of Integrity and Transparent Florida TaxWatch has recommended for years that the requirements to amend the Florida Constitution be strengthened, and in November 2006, voters listened. In the March 2007 report, Process to Amend Local Government Charters Should be Amended to Ensure Accountability, Integrity, and Transparency, Florida TaxWatch took a look at the processes of amending local government charters in Florida. Local government charters are organic documents that serve as a foundation and outline for local governments. However, there are currently only minimal requirements to amend local government charters, which do not ensure accountability, integrity and transparency. Florida TaxWatch recognizes that to adapt to the changing needs of the population it serves, a local government charter must be an adaptable document, allowing for thoughtful, deliberate revision. But it must include safeguards to ensure that any revision fulfills a need for change that benefi ts the public at large, rather than a special interest group. Strengthening the minimum requirements to amend local government charters to match those of the statewide constitution is a step in the right direction to improve the amendment process of local government charters. Florida TaxWatch made the following recommendations to help ensure that local government charters are accountable, full of integrity and transparent. The Florida TaxWatch recommendations include: A financial impact statement be included on the ballot, allowing voters to consider the estimated increase or decrease in revenues or costs to local governments resulting from the proposed amendment. A time period between submission of the petition and the election be established, ensuring that both sides of the issue have ample time to educate the voters on the merits of their position. Petition signature verifi cation requirements conform to Section F.S. to help ensure that the costs associated with citizen initiatives to amend charters do not unduly burden the local government and its taxpayers. The Florida TaxWatch recommendations, for the Legislature s consideration, would likely impact recent efforts in several Florida cities and counties to change local government charters and restrict development. 19th Annual Prudential Financial-Davis Productivity Awards Set for June State employees and workgroups who have developed innovative cost-savings and cost avoidances in their jobs will be recognized and rewarded for their outstanding work in a series of June award ceremonies throughout Florida as part of the Prudential Financial-Davis Productivity Awards. The program is sponsored by Florida TaxWatch, the Florida Council of 100, the state of Florida, and various private, corporate, and philanthropic sponsors. The Tallahassee kickoff luncheon and awards presentation will take place on June 6, from 11:30 a.m. to 1:30 p.m. at the Tallahassee-Leon County Civic Center. Regional luncheons will follow in Tampa (June 12), Orlando (June 13), Fort Lauderdale (June 14), Jacksonville (June 18) and Gainesville (June 20). Florida TaxWatch members are invited to enjoy lunch as our guest to help celebrate and honor these state workers. If you d like to attend, please contact Clarissa Dunlap at , extension 22, or by at cdunlap@floridataxwatch.org. 4

5 Florida TaxWatch Spring Board Meeting and Member Luncheon The Florida TaxWatch Board of Trustees 2007 Spring Meeting will be Friday, May 25, 2007 in Orlando at the Ritz-Carlton Orlando Grande Lakes Hotel, 4012 Central Florida Parkway, Orlando, Florida. Thursday evening, May 24, 2007, a Board of Trustees Reception and Dinner will be held for Board members and guests at the Ritz-Carlton Golf Club Fairways Restaurant. Also on Thursday, May 24, meetings of the Florida TaxWatch Center for Educational Performance & Accountability (CEPA), the Florida TaxWatch Center for Competitive Florida (CCF) and the Florida TaxWatch Research Advisory Committee (RAC) will be held at the Ritz-Carlton Hotel. A block of rooms is being held at the Ritz-Carlton Orlando Grande Lakes in Orlando for a special rate of $189 (these rates are also good for the Memorial Day weekend). You may make your reservation by calling and ask for the Florida TaxWatch block. Supreme Court Chief Justice Fred Lewis, Former Speaker of the Florida House of Representatives and Chairman of the Taxation and Budget Reform Commission Allan Bense and Department of Children and Families Secretary Bob Butterworth are all scheduled to attend this year s meeting. Governor Charlie Crist, Chief Financial Officer Alex Sink, Senate President Ken Pruitt and Speaker Marco Rubio have also been invited to participate and address the Board either during the meeting or at the Friday luncheon. All Florida TaxWatch members are invited to attend the Friday luncheon and are encouraged to bring a guest. Please RSVP to Erin Choy at echoy@floridataxwatch.org or call Erin at (850) , ext. 15. Thank you for your continued support of Florida TaxWatch We look forward to seeing you May 24 25, 2007 in Orlando. Florida Taxpayer Independence Day April 29 Beginning Sunday, April 29, Floridians began earning for themselves, not the tax collector. Florida Taxpayer Independence Day is a symbolic date that assumes that every dollar earned since January 1 goes to pay federal, state, and local tax obligations. On average, Floridians personal income will keep pace with the taxes they pay, meaning it will take the same number of days to pay their tax bills in 2007 as it did in Floridians will need to work 118 days, approximately a third of the year, to pay their taxes. Thinking that everything we ve worked for since New Year s Day has gone strictly to pay the government is a hard bite to swallow, said Dominic M. Calabro, President of Florida TaxWatch in a press release. The Legislature should work together to bring these rapidly rising taxes down so Floridians aren t spending a third of the year working for the government. Although Florida Taxpayer Independence Day falls on the same day as last year, it is three days later than in 2005 and seven days later than in Floridians income should grow faster than their federal and state tax obligations, but increasing local property taxes will keep Floridians from achieving tax freedom earlier this year than last. Local taxes are projected to grow 17% this year, while federal taxes are expected to grow 5.6% and state taxes are expected to decrease by 1.3%. Many Floridians are suffering from escalating property taxes, said Kurt Wenner, Senior Research Analyst at Florida TaxWatch and author of the report in a press release. Local government taxes are rising almost three times faster than federal taxes and twice as fast as state taxes. Even though they are the smallest portion of our tax obligation, local taxes are the fastest growing taxes in Florida. Since 2000, local taxes have grown by an average annual rate of 10.4%. This compares to 5.5% for state taxes and 3.5% for federal taxes. Florida TaxWatch created Taxpayer Independence Day in 1983 to keep taxpayers informed about the cost of government at all levels and how the growth of that cost compares to Floridians ability to pay for it. 5

6 Herrle Communications Group was honored with the Grand Image Award at the Capital Chapter of the Florida Public Relations Association s 2007 Image Awards. The grand prize was presented to Herrle Communications Group and their client, Kitson & Partners, for a communications campaign that helped secure support for the largest preservation land acquisition in Florida history. Herrle Communications Group is one of Florida s most effective public relations fi rms, known for their passion, commitment and connections. Member Congratulations Congratulations to Florida TaxWatch Chairman-Elect Charles Rehwinkel and the team at Embarq for being ranked as the top company for large businesses (500 employees or more) in the provision of local telephone services by J.D. Power and Associates. The ranking follows the merger a year ago that formed the company from local land-line telephone service provider Sprint and increased services to include wireless as well as Internet connection services and business applications. The Power survey included 2,048 business customers in the United States. Florida TaxWatch member, Frank R. Finch of West Palm Beach, was recently promoted from Senior Vice-President to President of Greenhorne & O Mara, a national engineering consulting fi rm. Mr. Finch will assume the direct oversight of the company s four operations groups, and will have a key leadership role in implementing the fi rm s corporate strategic plan and growth initiatives. Michael A. Jennings, Chairman; Dominic M. Calabro, President and Publisher; Steve Evans, Chief Operating Officer; John Turcotte, Senior Vice President for Research; Tiffany Koenigkramer, Editor Copyright Florida TaxWatch, Florida TaxWatch is a private, non-profi t, non-partisan research institute that over its 28 year history has become widely recognized as the watchdog of citizens hard-earned tax dollars. Its mission is to provide the citizens of Florida and public offi cials with high quality, independent research and education on government revenues, expenditures, taxation, public policies, and programs and to increase the productivity and accountability of Florida Government. On the web at N. Bronough Street P.O. Box Tallahassee, FL NON-PROFIT ORGANIZATION U.S. POSTAGE PAID TALLAHASSEE, FL Permit No