Transcript In the middle of difficulty lies opportunity”….Albert Einstein

“In the middle of difficulty lies
opportunity”….Albert Einstein
Once again Florida faces a gap – this one estimated at $3.5 billion –
between anticipated revenue and the costs of continuing current state
services – MOST OF WHICH HAVE ALREADY BEEN CUT OVER THE PAST
SEVERAL YEARS.
Since 2007, the legislature has taken a series of actions to balance the
budget in response to the recession:
Budget Gaps Have Been Closed
With Short-Term Fixes
• Cuts to services depended upon by Floridians
• cutting programs such as K-12 education, universities and state colleges,
Healthy Start, and community care for the elderly
• shifting more of the costs of public schools to local school districts and
local taxpayers
•
not providing the final $350 million needed to complete implementation
of the 2002 class-size reduction constitutional amendment
•
relying on billions of dollars in federal Recovery Act funds
•
raising tuition
New fees and taxes that hit middle-and low-income Floridians
disproportionately:
• increasing a variety of motor vehicle and court fees
• hiking the tax on cigarettes and other tobacco products
• expanding gambling
Spending down the state’s emergency fund - the Budget Stabilization
Fund
Sweeping money from state trust funds and using it for purposes
other than the specific uses for which they were created
Additional Cuts Hurt All of Florida
• They will come on top of billions of dollars cut previously
• Further harm the growing number of Floridians forced to rely on
state services to get by during hard times:
-- more than a million unemployed, only 15 states had higher
poverty rates in 2009, second highest rate of uninsured
• All Floridians benefit from good public schools and colleges,
decent roads, protection from crime, and other publicly funded
services necessary for a good standard of living
• Less state spending will reduce the flow of federal money into the
Florida economy if state matching funds do not maximize
potential federal revenue -- our tax dollars gone to Washington
Pac-Man of the Budget or
Powerful Economic Engine??
• Proposals to cut $800 million from the current
Medicaid budget would cost $1.5 billion in federal
matching funds, an estimated 14,000 jobs and an
estimated $600 million in lost wages.
• On the other hand, under health care reform an
average annual investment of $200 million in state
funding (including not only GR, but all other sources)
translates to $26.6 billion in total economic impact
over 6 years, a more than twentyfold return on
investment
State Government Has Responsibilities to Provide
Services Under the Constitution and Laws
• education for more than 3.7 million students in public schools and
publicly funded prekindergarten, and in state universities and
colleges, and more than 400,000 teachers, faculty, and staff
• health services for about 3 million low-income children and adults
in the Medicaid program and for other services to children and
families
• the costs for 100,000 prisoners in state prisons, including
correctional officers and staff
• substance abuse and mental health services for more than
450,000
• road and highway construction
• other services necessary for a well-ordered
society:
-- juvenile justice, environmental protection,
state parks, wildlife conservation, agricultural
services, regulation of businesses, state law
enforcement, and state courts
What’s a Legislature to do?
Dig the hole deeper?
IT’S ABOUT CHOICES
• Florida is not a revenue-poor state, but we do
have a poor and unfair way of collecting revenue
because of choices made since our tax system
was created in 1949 before we were the 4th
largest state in the country, relying on a service
economy.
Since enactment, Florida’s sales tax rate and/or
base has been changed to some degree in nearly
every legislative session.
To Fund Necessary Services, Florida
Relies on a Flawed Tax System
• Second-worst in the nation in terms of fairness, relying on the very
regressive sales tax more than any other state
• Asking our poorest, non-elderly residents (those in the bottom 20% of the
income scale) to pay up to six times as much of their income in taxes as do
the wealthiest (top 1%). Middle income (middle 60%) pay up to three
times as high a share of income. Institute on Taxation and Economic Policy 2009
• one of 9 states with no state income tax – prohibited in constitution
• Over the last decade state and federal elected officials have subtracted
$12 billion from the revenue available to meet the needs of the state -repeal of the intangibles tax and the estate tax -- both taxes on wealth that
made our tax structure less regressive
•New tax breaks every year -- making the sales tax more regressive
Tax Structure
Was Made More Unfair in 2009
• Regressive fees and taxes imposed by the legislature in
2009 cost Floridians about $2 billion each year – the same
amount no longer being collected each year from the
intangibles and estate wealth taxes
• $1 billion raised from higher fees on motor vehicle
licenses and registration, drivers licenses, vehicle titles
• $1 billion raised from higher tobacco taxes
“Smart Caps,” AKA TABOR –
(Taxpayer Bill of Rights)
• New proposals offered over the past several
years and a major priority of the Senate
President is the problematic constitutional
amendment enacted in Colorado a decade
ago known as TABOR.
• Well-funded anti-government groups have
pushed TABOR in over 30 states since 2005.
But every time they have failed.
TABOR is a revenue
and spending limit
• Included are the following three elements:
• It is a constitutional amendment,
• It restricts revenue and expenditure growth
to the sum of population change plus
inflation, and
• It requires voter approval to override the
revenue and spending limits
TABOR or Smart Caps
• May sound like a good idea but, TABOR does
not factor the existing or growing needs of a
state’s residents. In an era in which health
care costs are growing far faster than
inflation and populations are aging, limiting
the rate of spending growth to inflation plus
population growth forces annual reductions
in the level of government services. And it
locks a formula in the Constitution making it
near impossible to adjust.
Not Attempted by the Legislature:
Tax Modernization and Reform
•
•Since 1998, the legislature has enacted almost 100
exclusions, exemptions, deductions, and credits to
the state sales tax; others have been in place since
the tax system was created in 1949. There is no
systematic regular review of existing exemptions,
exclusions, subsidies, credits.
Some exemptions make sense – food,
medicine, healthcare, rent…
OTHERS???
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•
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$42 million annually for newspaper and magazine inserts,
$42 million for still bottled water,
$11 million to Charter fishing boats,
$78 million to boats or airplanes removed from the state,
$24 million in subsidies to Florida professional sports
teams, the Professional Golf Hall of Fame, the
International Game Fish Association World Center,
• $3.8 million on boats temporarily docked,
• $32.6 million on feed for livestock, poultry, race horses
and ostriches
TAX BREAKS =
BUDGET EXPENDITURES
• In total, $10.4 billion in annual breaks on the
sales tax
• Another $20.4 billion in services are not
subject to the sales tax because services are
excluded from the tax code
Corporate Income Tax Loopholes
• Exemptions for specific types of corporations (limited liability companies and
Chapter S corporations) cost the state about $1.1 billion each year. Since Florida
does not have an individual income tax, these companies fully escape taxation of
their profits. All but one other state without an individual income tax require LLCs
and Subchapter S Corporations to file and pay corporate income tax.
• About $100 million annually is lost through deductions and credits for
corporations;
•Another $400 million is lost because Florida doesn’t require combined reporting –
multi-state corporations not paying corporate tax on profits made in the state;
• $140 million in corporate taxes will fund vouchers for private schools
• A 2003 Florida Senate report found that the state lost $250 million to $500 million
each year from the corporate income tax because of “tax avoidance behavior” by
corporations
Another Modernization Possibility:
Streamlined Sales Tax Project
Florida loses an estimated $2 billion each
year in legally owed sales taxes not paid by
purchasers using the internet
Bricks-and-mortar stores are placed at a
competitive disadvantage
Unemployment Insurance
Modernization
Maximize federal funding -- $444 million
available in federal funds for benefits to those
who’ve lost jobs but unable to access Florida’s
outdated employment system;
Florida has the third-lowest recipiency rate in
unemployment benefits
Modernizing our Tax System Would:
• match the tax structure to the modern economy
• broaden the base of taxation to keep tax rates and
fees as low as possible, providing more balance and
stability
• reduce the tax burden on those least able to pay
by asking everyone to pay their fair share
• provide adequate revenue for vital state services
Brains, Heart, Courage
Dr. Martin Luther King, Jr.
“Human progress is neither automatic nor
inevitable…every step toward the goal of justice
requires sacrifice, suffering, and struggle; the
tireless exertions and passionate concern of
dedicated individuals..this is no time for apathy or
complacency, this is a time for vigorous and positive
action.”
Presented by: Karen Woodall, Florida Center for Fiscal &
Economic Policy/Coalition for Fair and Comprehensive Tax
Reform www.fcfep.org, [email protected]