Bradenton businessman and former state Senate President John McKay has
proposed a tax plan that would reduce homeowners' property taxes up to 45 percent at the expense of business interests
that have been exempted from sales tax for decades.
McKay, a member of the Taxation and Budget
Reform Commission, took steps Friday to address a "patently unfair" tax system by filing a proposed constitutional
amendment with the commission that would direct the Legislature to review all items and services that are not being taxed
in order to to repeal $15 billion worth of sales-tax exemptions on services and items like lawn care service, professional
sports skyboxes and cattle growth enhancers.
The new revenues collected would replace a bulk of
the property taxes collected for schools.
"Necessities of life" items like food, prescription
drugs and health services would remain exempt from sales tax. But hundreds of other exemptions would be reviewed and could
be subject to sales taxation. McKay estimates up to $100 billion in sales taxes goes uncollected each year
The plan would eliminate property taxes for education except those that have been pledged for bonded capital projects.
"This only covers somewhere in the neighborhood of 15 percent of all the exemptions and exclusions, but that would be
a very significant cut in everybody's ad valorem taxes," said McKay, a state senator from 1990 through 2002. "You
could structure it so the exemptions and exclusions you eliminated, to a large degree, are those that benefit special interests."
A three-fifths vote would be required by both houses of the Legislature to re-enact an exemption.
"It will give people the opportunity to say, 'We want property-tax relief' and the only way to do that
is to take schools off the property tax," said Tallahassee attorney Robert Nabors, who co-authored the amendment.
"Over the years, special interests have gotten exemptions on certain goods and that's eroded the sales-tax
base. This tells the Legislature to look at the exemptions and privileges you've given and ask yourself, 'Why isn't
this taxed?' "
It's a fresh twist on a measure McKay pushed in 2001, toward the end
of his tenure in the Senate. At that time the plan called for lowering Florida's sales tax from 6 percent to 4 percent.
The proposed referendum died in an appeals court, where a judge ruled the language was misleading to voters. Several business
groups challenged the proposal, which would have given a special legislative panel the power to eliminate sales-tax exemptions
worth billions of dollars.
"Before the property taxes reached this crisis point, we tried
to eliminate exemptions and exclusions in order to create a fairer tax system," McKay said. "In eliminating those,
you would have also been able to lower the sales-tax rate. This proposal has some of those elements, but you're applying
additional sales-tax revenues in order to lower property taxes."
McKay's plan could mean
even greater savings for Manatee County residents whose school district taxes make up about 52 percent of the overall tax
bill. If the plan moves ahead and schools only collect taxes for capital projects, it could mean an overall reduction of about
40 percent, according to Assistant Superintendent Tim McGonegal.
"One downside to a sales
tax is that it's a much more volatile tax base than property taxes," McGonegal said. "I congratulate John McKay,
though. He's taking a step that would really give Florida some tax relief. We've got to make changes, there's
no doubt about that."
Similar to the legislative process, the proposal will be examined extensively
in the coming months, first by the commission's Finance and Tax committee before being presented to the 25-member group.
The group of business executives, elected officials and governor appointees has been traveling the state gathering information
and tax-reform proposals from experts and from the public.
Most officials had yet to see the proposal
by Friday afternoon, but state Sen. Mike Bennett, R-Bradenton, said he's always been in favor of reviewing Florida's
sales-tax exemptions.
"But let's make sure it makes sense," Bennett said. "I've
never been an advocate of taxing services. In my mind that would be an income tax. I agree that we should review all sales-tax
exemptions."
The tax commission can make suggestions to state officials on tax reform, or
with a two-thirds majority the commission may place proposed constitutional amendments on the ballot. Based on talks during
public forums in recent months, McKay thinks the proposal will get widespread support from the commission.
But amendments to the proposal are likely to be part of the finished product. Commissioner Nancy Riley, a St. Petersburg
real estate broker, said she won't support the amendment if it doesn't exempt the purchase or sale of homes.
"Why should somebody who's looking for shelter have to pay sales tax on my services?" Riley said. "It
needs to exclude all shelter, health care and food."
Manatee County's largest taxpayer
advocate group, Coalition Against Runaway Taxation, hailed the proposal as "great news" that will benefit everyone,
instead of a select group of homesteaded property owners.
"We welcome the alternatives presented
by Sen. McKay, primarily because it eliminates about 40 percent of the tax base for all taxpayers without discrimination and
without increasing the sales-tax burden on the entire population," said CART President Don Schroder. "I think it
probably has a very good chance of moving forward because it is broad-based."
