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Business Observer Friday, Nov. 2, 2007 14 years ago

Walsh: Review and Comment

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Senate Republican leaders had a trump card, but they didn't have the courage to play it.

Review and Comment

Democrats killed real tax reform

by Matt Walsh, Editor and Publisher

Senate Republican leaders had a trump card, but they didn't have the courage to play it.

The hands of Florida's legislative Democrats and those of the Republican legislative leaders - Senate President Ken Pruitt and House Speaker Marco Rubio - are dripping with property-tax blood.

And the Democrats are the guiltiest of the bunch. They killed what could have been meaningful property-tax reform. Pruitt and Rubio are less guilty. But their lack of political courage and cunning allowed themselves to be outfoxed and to become unwitting accomplices to the crime.

So once again, the Legislature has completed another session with little, meaningful substance to show for its efforts. The alleged property-tax reform amendment slated for the January statewide ballot is about as weak and ineffective as the first one that the courts rejected. If voters approve this newest version (assuming the courts allow it on the ballot), it will help homesteaded property owners a little. It will help non-homesteaded owners not at all, and it will have a minimal effect on stimulating Florida's ailing residential real estate market.

In the end, it was politics. It was all about the Democrats putting their voting blocks - the public unions - ahead of taxpayers, and the Republican leaders bungling their opportunities. Let's review:

They were so close. Going into the last week of the session, Speaker Rubio and his House members had crafted and passed a plan that was almost perfect. It contained three key elements that were created with impressive strategic thought:

• 1) The homestead exemption would be based on a percentage of the median price of a home in each county and be extended to first-time homebuyers. As Rubio told Sarasota's Tiger Bay Club nearly three weeks ago, this would help the first-time homebuyers and also tie the homestead exemption to the values of homes in a county, thus eliminating some of the disparities created by counties' differing home values.

• 2) It included portability, a key element designed to provide relief to existing homesteaded property owners who have enjoyed the benefits of Save Our Home. They won't sell or move because they know they'll get clobbered with higher property taxes. This a huge deterrent to a free-flowing real estate market.

• 3) It included a 5% cap on annual assessments for all non-homesteaded property owners. Finally, lawmakers saw the light - they needed to provide relief to the segment that since 1993 has been slaughtered the most. This group, more than any, holds the key to revitalizing Florida's real estate market.

The only ingredient missing from this package was a measure that would cap the annual growth in state, county and local government spending. Rubio told Tiger Bay members he wanted to include that, "but if I tried to put anything else in the bill, they'd kill me." Besides, he said, although he favors it, his colleagues in Tallahassee are not ready to accept spending caps.

Be that as it may, the House's three-part package won overwhelming support among House members. It would have been a big winner in a statewide election.

But there were two hurdles: the Senate and the Democrats.

The Senate's plan was more complicated and had a lot of moving parts - doubled homestead exemption; $25,000 exemption for businesses' tangible property; portability; tax cuts for senior citizens and affordable housing; and a proposed 7% cap on non-homesteaded properties' annual assessments. They say the Senate is usually the more thoughtful branch of the Legislature, but this clearly didn't indicate it.

Enter the Democrats. Steve Geller, the Senate's leading Democrat, told Senate President Pruitt the House and Senate plans would be dead on arrival. Geller knew that for any tax-reform plan to make it to the January ballot, it would need the support of Democrat legislators to achieve the necessary two-thirds vote. Geller told Pruitt the Democrats would never support a 5% or 7% cap on non-homesteaded assessments. It had to be 10%.

Geller's chief concern (although he would never say it): His fellow Democrats knew a 5% cap on non-homesteaded properties would mean big spending cuts for their constituencies and source of votes and money (police and firefighter unions, teachers union and public employee unions). Above everyone, the Democrats had to protect their own. A 10% cap - which is essentially meaningless - would offer decent protection.

It was Pruitt's move. He knew the pressure was on. He knew the Senate could not embrace the House plan because the Democrats wouldn't budge. At the same time, Republican Senate leaders knew they had to adopt something to save face with Florida voters.

Pruitt had a trump card, but he didn't have the courage to play it.

Sen. Mike Bennett, R-Bradenton, urged Pruitt to call the Democrats' bluff. He urged the Senate to adopt the House plan. The trump was this: If Democrats refused to put the House plan on the ballot, they alone would be responsible for killing property-tax reform, and such a move would give Republicans a huge advantage in the next elections. Democrats could be blamed for everything wrong in the Florida economy and real estate market.

We know what happened. Pruitt wouldn't and didn't stand up to Geller. He didn't play the card. He was more afraid the Democrats would hold and the Legislature would go home with no reform at all.

In spite of this, Pruitt outplayed his House colleague, Rubio.

The Senate modified its plan to what ultimately became the final package - raising the homestead exemption to $50,000, portability, a $25,000 tangible tax exemption for business and a 10% assessment cap on non-homesteaded properties. And after it approved the plan, Pruitt sent the Senate home, saying its work was completed; it would negotiate no more.

This meant the House had no choice but to adopt the Senate compromise.

How did Rubio get outfoxed? After the House adopted its plan, Rubio sent his members home to wait to see what he and his fellow House leaders could negotiate with the Senate. It was a fatal flub. He should have done what Pruitt did - adjourned the House's special session. The Senate would have had two choices: adopt the House plan or go home with nothing at all.

Instead, the voters get another piece of junk. Politics stinks.

RUBIO FOR GOVERNOR?

Florida House Speaker Marco Rubio is impressive.

When you listen to him, you say, "He should be governor."

Appearing two weeks ago at the Sarasota Tiger Bay Club, Rubio addressed more than 300 attendees extemporaneously - primarily on tax reform. And he did it with eloquent fluency, simplicity and doses of quick humor. He talks the common man's language. He's one of us - 36 years old, a dad of four young children, working hard to make ends meet.

Before he spoke on the specifics of what was being debated in Tallahassee, Rubio presented his version of "how I see Florida."

"Florida is at a crossroads," he said. "What kind of state do we want to be?

"People came here to get away from somewhere else," he said. "They came here from Cuba to get away from socialism. They came here from Massachusetts to get away from socialism in Massachusetts [he laughed]. So do we want to be a place where people continue to come because they want to get away from somewhere else? Or do we want to be a state where people leave because they want to get away from here?

"People have a choice," he said. "They will move to get away from here (if taxes are high). "This (property-tax reform) has not been about anti-local government. You cannot tax people more than they can afford to pay or more than they are willing to pay. They will move.

"If you want to have a strong government revenue source," he said, "you're going to have to have a strong economy. Florida is not sending the right signal now."

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