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Review & Comment: Walsh
SEC chief, regulators get sacked
over Madoff
By Matt Walsh
Ther's a headline we should read but won't.
+ The wailing begins
With Gov. Charlie Crist's recent request that all state departments make proposals to cut 10% of their budgets, we're already hearing the wailing: Widows, orphans, seniors, the dying and public school children will be deprived and thrown into the streets to suffer.
This is the way it always works. Lawmakers order up proposed cuts; bureaucrats respond by offering up the neediest as sacrificial lambs to shame lawmakers into Catholic and Jewish guilt trips.
Been there, done that.
But this is the inescapable fact: The state's revenues are about $2.3 billion less than what lawmakers expected six months into the fiscal year, and there is no way around the options: 1) spending must be cut; 2) taxes raised; 3) money pulled from protected trust funds and reserves; or 4) some of each.
Repeat this scenario 67 times for each Florida county and 412 times for each incorporated Florida municipality.
It's ugly out there, folks.
What's a politician to do?
Take the Hippocratic oath: Don't make the patient worse. You cannot raise taxes, not even on the smokers. Many of them are already hurting and cutting back because of losing their jobs and government-induced inflation. If you punish them for their consumption of smokes, why not punish SUV drivers or boat owners for consuming oil? Or fat people for eating too much? No, raising taxes is not an option at any level.
That leaves options 1 and 3 - cut spending and tap trust funds and reserves. Emphasize option 1.
See next item.
+ Finish Rubio's job
Remember property-tax reform?
Floridians still want it and need it - badly.
Now anyone who pays even a whit of attention to the Legislature knows state lawmakers can't chew gum and run in place at the same time. Which is another way of saying they cannot adopt big ideas and big issues in the same session. They'll be so consumed with nitpicking over budget cuts in January and in the spring, they'll likely forget the one issue taxpayers crave action on most and the one issue that could lead Florida into an economic recovery faster than would otherwise occur: finish former House Speaker Marco Rubio's job of reforming Florida's property-tax system.
Property-tax reform has disappeared from the daily newspapers' news reports. Their reporters have been preoccupied with reporting the predictable holiday gruel: That economic suffering goes up when the economy goes down - as if we need a daily reminder.
But just to refresh everyone's memory, Leadership Florida and Mason-Dixon Polling & Research reported last week the results of their third annual Sunshine State Survey. Here are the first three paragraphs from the groups' press release reporting the results:
"Although no longer cited as the state's most important issue, having been dwarfed by concern over the down economy, the third annual Sunshine State Survey reveals Floridians views toward taxes has changed little over the past year.
"In a survey of 1,200 Floridians, 42% see state taxes as "too high" (up from 41% in 2007 and 39% in 2006), while 42% feel they are "about right" (down from 47% in each of the past two years), and only 4% continue to feel they are "a little too low."
"'Even though taxes are not the big story this year, opinions and attitudes haven't changed. People are not happy about paying taxes,' says Brad Coker with Mason-Dixon Research who conducts the poll."
And just to reconfirm the hue and cry from last year's Tax and Budget Reform Commission public hearings, the Leadership Florida survey shows the taxes Floridians hate most and find the "least fair" are property taxes. See the accompanying box above.
To be sure, the property-tax pain has subsided some because of the recession and drop in property values, but it's still the biggest and most onerous tax in Florida. What's more, if you recall, the Legislature failed to finish the job last year of reforming Florida's property-tax system. It gave us tax-reform ultra-lite. We still have a rotten, two-tiered system that shifts an unfair burden on non-homesteaded property owners, i.e. commercial and second-home owners - exactly the two groups we should want to increase in Florida.
We want more commercial buildings. That means we'll have more economic activity, more jobs and more wealth generation. And we want out-of-state, second-home snowbirds. They're great for the economy. They spend while they are here; they contribute to our tax bases year-round and yet they don't consume nearly the same level of public services as full-time residents. One way to look at the snowbirds is they help provide a huge tax discount for full-time Floridians. Send us more snowbirds.
And that brings us to the "big idea" for property-tax reform - the Tax and Budget Reform Commission's Amendment 5, which our activist Supreme Court booted off the November ballot.
This was the tax-swap proposal to eliminate the local-effort school property tax (32% of your property taxes) and replace it with an increase in the sales tax or other taxes to offset the loss in property-tax revenue.
Business groups, educators and politicians hate this idea. But that's because they all have selfish interests to protect and do not understand the incredible upside to this reform.
It would create an economic boon, not doom, in Florida. As we reported last summer, before the Supreme Court denied Floridians the opportunity to vote on the measure, eliminating the local-option school tax would have several positive effects:
1) It would eliminate the shenanigans the Legislature engages in every year by hiking the local-effort school millage rate, unbeknown to most Floridians. When taxpayers get their tax bills, they think local school boards are the bad guys who have increased school taxes. But it was really the Legislature. Florida economist Hank Fishkind told us a lawmaker actually told him legislators look at the local-effort school property tax as "free money."
We've called this Florida's "stealth tax."
2) It would boost every property owners' net worth and wealth - an estimated $80 billion increase in Floridians' wealth. Cutting 32% of your property-tax bill would put instant cash in every property owner's hands. This cash would then flow into the economy.
What's more, the drop in property taxes instantly would make it more attractive to build and own property in Florida - the boost we need now.
3) The measure would kill once and for all Florida's unfair and onerous property-tax system.
There are minor downsides to this reform. To offset the elimination of the local-effort school tax, Fishkind recommended increasing the state sales tax 2 cents. This, of course, would depress the sales of big-ticket items and be regressive on the low-income consumers. But Floridians still would get a 20% discount on the increased sales tax - from tourists. What's more, the increase in the sales tax could be offset by a decrease in rental rates, a wash for low-income consumers.
This idea may seem too complicated, far-fetched and controversial for the times. But this is when leaders are expected to rise to the occasion and be courageous.
While Washington continues to make a bigger mess of our national economy, the challenge at the state and local levels is to affect the pieces of the economy within their powers.
As noted above, the best choice of all is for government to do what businesses are forced to do: Reduce expense levels below revenue levels and be as creative as possible in figuring out ways to boost business activity.
History has shown that at the public policy level there is no better way to boost an economy than to cut taxes and cut spending.
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