Ready answer to state budget problems

-A A +A
By Jim Flynn

The most wonderful things about the State of Florida are its proximity to the planet sun, the convenience of a bank and a pharmacy on every block, a reasonable cost of living, and lots of taxes from tourists.

It’s a rare election which doesn’t include at least one opportunity to raise or lower taxes on residents. Reductions are greeted warmly. Proposals for new or additional taxes are usually voted down. It’s sort of a cultural thing.

The modern history of Florida is about land and housing. It all began in the1920s in south Florida with easy credit and cheap land – some of it above water. In no time investors and speculators blew up a huge bubble of inflated real estate values.

A series of unexpected occurrences deflated the famous Florida bubble of the 1920s – bad publicity, a ship stuck in Miami harbor, a hurricane, and the collapse of Wall Street. The only creatures that  prospered in Florida for the next 20 years were fruit flies.

In the 1950s, Florida participated in the nationwide, post World War II housing boom. Then came tourists, and Disney, and more tourists, and retirees, and more tourists, and land speculators who sensed inflation of another real estate bubble, a return of house-flippers heaven.

Cloudy skies closed in over housing heaven in 2007 – tightening credit, declining values, lost jobs, and foreclosures. Agriculture and tourism were left to keep the boat afloat until the real estate fairy returns.

In the meantime, cities, towns, counties, and Tallahassee have to solve the mystery and misery of declining tax income. No one knows when the happy days of free spending and hiring based on inflated values may come again.

Headlines have been amusing: “Speeders may help fill hole in budget.” It would have to be a pin hole. “Legislature closes budget gap” (by reducing education funding).

Oh, and “1,400 state government jobs cut.” Turns out most of the jobs hadn’t been filled to begin with, a classic case of imaginary savings.

We have yet to hear a politician say we can no longer afford all the additions they made when taxes from inflation were gushing into state and local coffers. They prefer to point to their heroic efforts of recent years to lower state and local taxes with little thought to the future.

A prayerful and soothing headline which has appeared more than once of late is “State leaders are banking on federal stimulus to pay for services.” All state services are essential so long as money can be found to pay for them without raising taxes.

There has been an unresolved argument in Florida that the state sales tax exempts more value than it taxes. The argument isn’t important; it’s the howling that occurs whenever exemptions come up for discussion.

The Florida retail sales tax is the most regressive form of taxation. Regressive means the tax takes a greater share of low incomes than high incomes.

Retail sales are where folks with the lowest incomes spend most of their money.

Put bluntly, lowest income folks get screwed.

A legislator from Ormond Beach has filed a bill to remove the 60-year-old sales tax exemption on bottled water. She’s not optimistic, even though the exemption makes no sense considering that other bottled drinks are taxed.

Consider that water bottlers get their natural resource product out of our dwindling water supply, that they are asking to take more, and that they pay sales taxes on their product in other states. Like most retail sales tax exemptions, it doesn’t pass the logic test or the smell test.

Legislators and lobbyists muddle up every consideration of the merits of Florida’s 250 sales tax exemptions and a hundred other loopholes in the sales tax law. Their muddling and meddling is not accidental.

A major muddler is referring to any thought of removing an exemption as a tax increase. That’s bunkum. Over the past 60 years, multiple rate increases have fallen only on those who pay retail sales taxes, not those who have a free pass exemption forever and ever.

The originally proposed exemptions were for basics – food, rent, utilities, prescriptions, health care. An immediate exemption was also given to food for poultry, livestock, racehorses, and ostriches. There is no mention of drugs, and health care paid by or on behalf of the named critters.

Serious silliness has multiplied over 60 years. Every session of the legislature receives new appeals for exemptions in the name of righteousness.

There’s little doubt the legislature will continue current exemptions without embarrassment. Maybe some day they’ll figure out that revoking all the asinine exemptions is a reasonable, just, and ready answer to state budget problems. Then again, maybe they won’t.

Jim Flynn was formerly a corporate counsel, served in military intelligence during the Korean War, and once aspired to be a newspaper columnist.