Newspaper article The Florida Times Union

SCHOOL FUNDING; Swapping Taxes

Newspaper article The Florida Times Union

SCHOOL FUNDING; Swapping Taxes

Article excerpt

Voters in November will have the chance to vote on a big tax cut that's really a big tax shift.

The proposal pushed to the ballot by the state Taxation and Budget Reform Commission is the latest - and biggest - move yet in a historic state tax drama that's seen the state Legislature, Gov. Charlie Crist and the commission all jockeying to reform Florida's property tax system independently of one another.

In this case, voters will be asked to approve a proposal that would eliminate most local property taxes paid to schools - or about $9.3 billion statewide.

To replace it, the Legislature would boost the state tax by a penny, axing some sales tax exemptions and likely making some budget cuts.

If voters agree, the change would be deceptively heralded as one of the biggest tax cuts in Florida history, with the average property tax bill statewide slashed by 25 percent.

That gimmick is likely to appeal to many voters.

RISKY FLIP SIDES

A solid school funding base is being diversified in favor of a sales tax foundation that is sure to fluctuate with the state's economy. State lawmakers would be forced to re-evaluate sales tax exemptions, which could be both beneficial and dangerous to economic development at the same time, depending on what they decide. Some businesses that are not taxed now could faces taxes in the future to compensate.

Raising the sales tax by a penny would also shift the tax burden to more Floridians who have less money to pay.

The amendment would spell disaster for local school districts unless the Legislature found a way annually to keep their funding stable, which would present its own challenge with each new budget year.

Advocates for the change say that less property taxes to be paid will stimulate the economy and boost economic growth. But a study by Florida TaxWatch says that generally replacing property taxes with sales taxes will hurt the economy.

MORE EQUITY

One constructive feature of the proposal is the 5 percent annual cap on assessed value for nonhomesteaded property, such as businesses, second homes and rental properties.

Property owners without the 3 percent homestead exemption afforded to homeowners have taken a beating in recent years from the skyrocketing property values. …

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