"FAIR" Tax Reform Amendments Face Yet Another Hurdle
Update as of November, 2006
Floridians Against Inequities in Rates (FAIR) just won't quit. After the Florida Supreme Court tossed their twice-rejected schemes to overhaul the state’s tax system off the ballot in both 2002 and 2004, organizers attempted to breathe new life into their plans but were unsuccessful in obtaining enough signatures to place three separate citizen initiative constitutional amendment proposals on the 2006 general election ballot. According to Florida law, the group would be allowed to continue collecting signatures to qualify for the 2008 election, however, problematic language in two of the amendments that requires legislative tax reviews to be completed by July 1, 2008 (four months before voters could even approve the amendments) may mean that the group must start their petition drive over from scratch for the third time. The Florida Supreme Court heard oral arguments on the issue on November 1st but has not yet ruled on the subject.
Backers of the FAIR proposals are the same three tax-reformer "formers" behind the previous attempts: John McKay, a former state senate president from Bradenton; Bob Butterworth, former state attorney general and; Bob Milligan, a former state comptroller and cabinet member.
A History of the Issue
The groups' 2002 attempt came in the form of legislative approval to place a proposal before voters to create a 12-member committee for the purpose of reviewing all exemptions and exclusions from the state sales tax. Amendment 5, as it was labeled, was criticized heavily for giving only a handful of legislators (potentially just 7 out of 160) the power to alter Florida's entire tax structure, greatly impacting the state's citizens, families, businesses, and economy.
In 2004 the group proposed a constitutional amendment requiring the entire Legislature to review all sales tax exemptions and determine whether the sales tax should continue to exclude services.
Neither the 2002 nor 2004 amendment was able to pass required review by the Supreme Court and neither made it on the ballot to be voted on. Unfazed, the group again attempted to change the state's tax system by authoring constitutional amendments. To comply with the Supreme Court's wording policies, the group restructured their 2004 initiative into three separate amendments proposed for the 2006 general election ballot.
The FAIR amendments are an attempt to expand the tax base by eliminating special interest exemptions and reinstating the services tax. Basically stated, the amendments would require the Legislature to review all current sales tax exemptions starting in 2008, and every ten years thereafter. Current exemptions would require a super-majority, three-fifths vote of approval by lawmakers, otherwise the exemption expires.
While the backers of the FAIR amendments failed to obtain the 611,009 signatures needed to receive consideration on the 2006 ballot, history suggests that supporters of the services tax will turn up again soon with a repackaged version of their ill-advised tax "reform" schemes.
Why It's Bad for Advertising and the Economy
Advertising space and services are currently exempt from sales tax, as are a variety of items important to the printing and film industries. Extending the state sales tax to cover advertising would have detrimental consequences for the industry and the economy as a whole.
Advertising is the engine that fuels our economy. Increasing the cost of advertising through taxation means that businesses will be able to afford less advertising, resulting in fewer sales, less revenue, and decreased jobs.
Consumer watch-dog group, Florida Tax Watch, reports that the taxation of services would lead not only to increased administrative and compliance costs for both the government and taxpayers, but also to double taxation. Double taxation, or tax pyramiding, occurs when the goods and services a business purchases as inputs into their product are taxed at the time of purchase and again when the tax is incorporated into the final cost of the product.
According to the Mackinac Center for Public Policy, taxing services has an especially harmful impact on small businesses, which rely heavily on other businesses for janitorial, computer, accounting, legal, and advertising services. This creates an unfair advantage for larger businesses that provide these services in-house and could avoid the sales tax on them. This is a concern for the overall health of the economy as more than three-quarters of all new jobs are created by small businesses.
What the proponents of the FAIR amendments fail to mention is that Florida experimented with an expanded services tax in 1987, with dismal results. The services tax proved to be unworkable, resulting in high confusion and low compliance and was repealed after only six months. The short-lived services tax had disastrous effects on the advertising industry in Florida. During the months when the tax was in effect, advertising purchases in Florida decreased by 12% and broadcasters in border markets experienced revenue losses of 45%.
For More Details
For more information visit: http://election.dos.state.fl.us/initiatives/index.shtml for details on the petition process by the Florida Secretary of State; www.FloridaTaxWatch.org for more information on taxation issues; or www.VoteSmartFlorida.org for information presented by the Florida Chamber of Commerce. Also, be sure to keep an eye out for e-mail updates from your Fourth District AAF legislative team or contact Fourth District AAF lobbyist Jack Hebert at jack@themallardgroup.com.
