Amendment 5 tax plan only buys trouble for Florida
By: State: Florida | Source: aarp.org
Amendment 5 deserves close scrutiny from Florida voters—and AARP recommends a no vote.
In November, Florida voters will be asked to decide whether to trust state lawmakers in a massive state tax gamble that could hurt Florida’s already financially pinched public schools and devastate critical public services—including health care, care for frail elders, criminal justice and human services.
Budget experts who have examined the amendment say that the wording of this proposal makes it very hard to determine exactly what would happen if this amendment were enacted. Rather than lay out a clear tax-law change and a clear consequence, the amendment would force a drastic change in school funding and then leave it to the Florida Legislature to decide what to do next.
AARP is recommending that voters reject the so-called "tax swap", noting that the plan is actually a net tax increase. AARP also believes the plan’s benefits are too uncertain and the potential risks are too great to justify its adoption.
On the surface, Amendment 5 pretends to be a simple idea—it proposes to eliminate an estimated $8.9 billion in public school funding, effective in 2010. Actually, it is extremely complicated. However, one respected taxpayer-advocacy group that has studied the amendment closely, Florida TaxWatch, says the highly technical wording of the amendment actually would leave a bigger budget hole—up to $11.1 billion. To "replace" the lost funding, the amendment lets the Florida Legislature choose one or some combination of three options:
1. Raising state sales taxes by one-sixth (a 16.7-percent tax hike). With local sales taxes already at 1 to 1.5 percent, most Floridians would pay 8 to 8.5 percent sales tax on every taxable purchase if lawmakers chose to raise sales taxes. AARP economic experts note that the sales tax is one of the most regressive taxes in use—its burdens fall most heavily on those with the lower incomes, especially on elders living on fixed incomes such as Social Security. On a major purchase, such as an automobile, this sales-tax increase could cost hundreds of dollars.
Even if lawmakers voted for this method of "replacing" some of the school budget cut, a state sales-tax increase still would leave a gaping, $5 to 7.2-billion budget hole. Therefore, even if lawmakers approved a sales-tax hike, they also would have to raise billions in other taxes, make deep budget cuts in non-public-school spending, or some combination of both.
2. Cutting services. Under the terms of the amendment, legislators could opt to make up all, or part of, the $8.9 to $11.1-billion budget hole by slashing state spending. Although state health and human services programs already have suffered hundreds of millions of dollars in cuts in the 2008 legislative session, AARP believes this amendment poses the possibility of the wholesale elimination of a broad range of public programs, including many benefiting people age 50+. If they chose not to raise taxes, lawmakers would have little alternative but to slash spending across virtually all public programs, even for services that are rarely if ever cut, such as state prisons, law enforcement and the justice system.
While no one can predict the exact amount or impact of the cuts, health care—the second most expensive item in the Florida state budget behind education—is almost sure to get slashed, budget experts believe. State support for programs aimed at helping older Floridians to remain in their homes also could be devastated.
Though the amendment protects public-school funding the first year, this protection is eliminated in following years, opening up the possibility of deep education budget cuts after 2011.
3. Eliminating tax exemptions for untaxed business and professional services. While the amendment does not specifically require this approach, lawmakers faced with brutal budget realities could opt to repeal tax exemptions for many services that currently untaxed. Florida business interests very strongly oppose eliminating these tax exemptions. Lawmakers also could eliminate economic-development tax exemptions—a move that TaxWatch says would cripple Florida's ability to keep or attract businesses to the state.
AARP recommends that Florida voters reject Amendment 5, saying that any benefits from its adoption are too uncertain, and the risks too great, to justify supporting it. Also opposing Amendment 5 are top state lawmakers, including Senate President-designate Mike Haridopolis; Florida education leaders; a state hospital group; Florida agricultural leaders; Florida business leaders; and children's advocates. The Florida Association of Realtors supports the amendment.
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