Tax Analysts Blog

The Good, the Bad, and the Ugly -- Florida Governor Rick Scott's Tax Ideas

Posted on Sep 10, 2014
Florida Gov. Rick Scott (R) is in a tight reelection fight. Former GOP-governor-turned-Democrat Charlie Crist is neck and neck in the polls to reclaim the office. Scott has stepped up his campaign and has proposed a series of significant tax cuts that he hopes will turn the tide of the election. Like most election-inspired tax reform, Scott's proposals are mostly geared toward collecting votes and have little to do with sound tax policy.

Let's start with the ugly. Scott wants a constitutional amendment to limit property taxes. In general, that's an awful idea. The property tax is good for funding local government services. If it's limited, local governments are forced to rely on state aid to pay for services. That limits local autonomy and puts pressure on the state budget. Florida citizens don't even like the idea -- they have defeated similar proposals in the past, including as recently as 2012.

Worse, Scott would like to adopt $200 million in new sales tax holidays. Every public finance expert who has ever thought about sales tax holidays has unequivocally stated that they are a terrible idea. For Florida, with its heavy reliance on the sales tax, holidays are particularly awful. Someone should tell the governor that sales tax holidays don't work (and that even if they did, they represent everything that's wrong with American tax policy).

That being said, Scott has proposed some good things. He wants to continue phasing out the state corporate income tax. I've been saying for more than a decade that the state corporate income tax doesn't make a lot of sense in today's global economy. Continuing down a path to eliminate a tax that is largely voluntary is a good idea.

Scott has also proposed eliminating the sales tax on commercial leases and manufacturing equipment, both very good ideas. Generally, business purchases should never be subject to sales tax. Those taxes are passed on -- stealthily -- to consumers. The way that particular tax operates is nontransparent. It is not good governance. So Scott should be applauded.

The governor also wants to reduce local telecommunication service sales taxes and car registration fees. Those proposals are intended to appease public unhappiness with both sources of revenue. The registration fee cut will save citizens $25 a year. Who knows -- that may swing the election.

Unfortunately, the property tax limitation and the sales tax holidays will resonate with the electorate. People hate property taxes, and they love to think they're saving money during the holiday. The business tax cuts will no doubt make the business community happy -- no small feat during an election year.

Crist has been silent on taxes so far during the campaign. Perhaps he's still thinking about his gubernatorial pledge never to raise taxes.

Read Comments (2)

edmund dantesSep 10, 2014

I agree with all of your points save one: the property tax is a terrible tax.
It is terrible because it is separated from any transaction in which money
changes hands, which is essential to determining a fair tax. It is terrible
because over time it becomes increasingly arbitrary and divorced from property
owner expectations and control.

When I buy a property, it has a known value, based upon my transaction. Ten
years later, the value is entirely speculative, but the judgment of a
bureaucrat will be used to determine my taxes, typically far higher that what I
expected. My only recourse is to sell the property.

A cap on property taxes does not reduce current revenue, only revenue growth,
but it does limit the exposure of property owners to future arbitrary tax
increases that they can't possibly plan for. That's why the cap is popular, it
gives property owners a semblance of certainty.

You like property taxes on the theory that it promotes local autonomy.
Hypothetically, that suggests local spending will be limited so as to avoid tax
increases on local property owners. I have never seen one single example of
that being true. Property owners have complained to tone-deaf local
politicians with no result at all, forcing them to go up the ladder for relief.

I live in CT, which has some of the highest property tax rates in the country,
coupled with very high state and local spending. That has led to economic
stagnation, flight of businesses to lower tax jurisdictions, and the marked
deterioration of the middle class.

Property taxes may be a necessary evil, but it is also necessary that they be
capped.

Bob KammanSep 15, 2014

Generally, business purchases SHOULD be subject to sales tax if business
products are sold to out-of-state consumers. If a Floridian buys a product
made in New York, which taxed the manufacturer on leases and purchases, why
should Florida give a free ride to New Yorkers who buy Florida products?

For example, tax the citrus growers. Floridians can grow their own. Northeast
residents don't have much choice. Sunshine is a Florida natural resource.
Those who benefit from it, should pay some sort of royalties.

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