Tax Exemptions Targeted as State Budget Hole Grows?

TALLAHASSEE — Businesses across Florida are carefully watching the Legislature with the deepening cash crisis facing state government leading to the most serious talk of eliminating some tax exemptions since former President John McKay took on the tax structure eight years ago.

   Democrats and advocates for government programs that annually face a difficult time in the budget process have long suggested that Florida's hodge podge of exemptions to the sales tax are unfair and should be reviewed.

   But with budget writers trying to figure out how to deal with a $2.3 billion deficit in the current year, there's widespread talk at the Capitol about whether the state might bring in a little more revenue by eliminating some of the 240-some-odd exemptions, deductions and credits to the sales tax.

   In addition to Democrats, now some Republicans are talking about it too, though few are openly discussing details. One who is in favor of removing some exemptions is Sen. Jim King.

    “Let's go through the sales tax exemptions and let's do away with those that we don't need,” said King, R-Jacksonville, a former budget chairman, who was majority leader when McKay tried and failed to overhaul the tax structure in the early 2000s. King was also a new member of the Legislature in 1987 when lawmakers tried to raise revenue by adding many services to the sales tax, a move that later had to be repealed. 

   “I think everybody is focused in on the fact that we're on a quest for new money and I think a lot of people are going to more amenable to consider these things,” King said.

    And the effort may gain some momentum from an open-minded Senate President Jeff Atwater, R-North Palm Beach, who has said repeatedly that everything is up for consideration. On Florida Face to Face on the Florida Channel this week, Atwater reiterated that, and said specifically about tax exemptions that this spring with its budget challenges brings an “opportunity to look at the sales tax,” for ways it might bring in more money.

   King and Atwater join several Democrats in the House who are pushing for a line by line review of exemptions for possible repeal.

    Rep. Scott Randolph contends much of the tax cutting that occurred during the eight years of the Bush administration actually consisted of new exemptions for “special interests.”

     “The best way to avoid tax increases on small business and the middle class is to close the loopholes that big corporate lobbyists have gotten their special interest clients over the years,” said Randolph, D-Orlando. 

   Among the exemptions Randolph points to as potential targets, is bottled water. If it's sparkling mineral water, or water straight from the tap, you pay tax on it, but if it's regular bottled spring water, you don't. Rep. Rick Kriseman, D-St. Petersburg, has also suggested an end to the bottled water exemption.

    It's difficult to say how much the more than 240 exemptions keep the state from collecting each year, because some exemptions overlap and sales of exempted products vary from year to year.

    The list ranges from huge largely untouchable exemptions like residential rent and prescription drugs, which the Department of Revenue says cost the state about $1 billion each, to several whose value is so insignificant the agency doesn't even calculate the value. Among those is one of the whipping boys of those who think some exemptions ought to be removed: the tax free status of Super Bowl tickets when the game is held in Florida.

    Other poster child tax exemptions include sky boxes at high school or college stadiums and ostrich feed.

     By most accounts, there aren't any ostrich farms operating in Florida any more, so eliminating that exemption wouldn't generate any money, notes Florida Farm Bureau lobbyist Ben Parks.

    “If we do have any ostrich farmers, I don't know about them,” Parks said. 

    But farmers do depend on the exemption for feed for other livestock, and for their equipment – and need those exemptions to be able to compete with agribusinesses in other states where those items are tax free, Parks said. 

    “We do our best to make sure we can compete with our neighbors,” Parks said. And such economic breaks are sometimes the only thing that allows Florida farmers to compete with those in other countries as well, where raw materials and land are sometimes cheaper, and there are fewer regulations.

    “That's why we have the cheapest, most abundant food in the world,” Parks said.

     Parks and others who lobby for businesses say they generally don't have a problem with having to justify their exemptions, and several said they wouldn't mind a line-by-line review, as long as the burden of proof is on those who want to get rid of them, not those who want to keep them.

    “The business community … is not fearful of any kind of review of the sales tax exemptions,” said Randy Miller, a lobbyist with the Florida Retail Federation. “If they don't meet muster, then you repeal it.”

    What they fear is that lawmakers may repeal them first and ask questions later about whether they should be reinstated.

    Miller also noted the conundrum of the debate – the exemptions that aren't needed anymore like the one for ostrich feed, or those that don't have a lot of serious lobbying behind them, like the sky box exemption, don't yield much money. If you really want to make a dent in the budget, “you're going to have to go out and repeal things that are beneficial” to lots of people, and therefore likely to be difficult to get rid of, he said.

    “Food, medicine, those kind of things,” would yield the most money. “Nobody in their right mind would repeal those,” Miller said. “And the ones for business, they make economic sense.”

     King pointed out that it wasn't even easy to get rid of the things that seemed easy – ostriches still get to eat without paying taxes, even though no ostrich farmer has recently come to Tallahassee to beg for the exemption to remain on the books. And so, the effort to repeal the tax – like the bird itself – can't get off the ground.

     “Last year we tried to do away with the exemptions for ostrich feed, and we couldn't,” recalled King. “We didn't have the votes to do it. If that's the case with ostrich feed, what's it going to be for sky boxes? What's it going to be for barber shops? Or whatever? It's one thing to say that we ought to do it. It's another thing to have to do it.”

News Service Florida Reporter Kathleen Haughney contributed to this report.