Tax Justice Digest stories about Florida
For over two decades, Mississippi and Florida have bucked the national
trend of increasing cigarette taxes. But now, staring down massive
budget deficits, Mississippi Governor Haley Barbour recently signed a 50 cent-per-pack cigarette tax increase, and Florida Governor Charlie Crist appears ready
to do the same with a $1 per pack hike. Given that each is a
conservative governor with at least some national aspirations, the
result is a bit surprising to say the least.
In the case of Governor Barbour, his approval was especially unexpected in light of his status as a former tobacco industry lobbyist. Governor Crist's support was likewise unanticipated, largely because he has
signed
pledges to oppose tax increases as both a Governor and as a candidate
for federal office. Crist was careful to frame his support as entirely
focused on the public health aspects of cigarette tax increases, though
it's hard to believe that his desire to avoid forcing a special session
to balance the budget had nothing to do with his decision. Thus is the
responsibility of governing. Sometimes tax increases cannot be kept off
the table.
As a recent report from the
While passage of the measure is not assured,
At the state level, the usual response to recommendations that taxes be increased to preserve vital state services has generally been: "Now is not the time". The most notable exception to this trend so far has been with the cigarette tax, as we've explained before. Increasingly, however, policymakers appear to be coming around to the idea of boosting gas tax rates in order to raise the revenue needed to maintain our nation's infrastructure. Given that most state gas taxes haven't been increased for quite a few years, and that during that time inflation has significantly eroded the value of most gas tax rates, our only response can be, "It's about time."
In Maryland, for example, the Senate President recently expressed an interest in raising the gas tax, urging that "there's got to be an increase in the transportation trust fund somewhere, and there's got to be a way we can find people with the political will to make it happen". Numerous governors have echoed this call as of late, most recently in Massachusetts, and Idaho.
In Idaho, especially, the Governor was able to hit the nail on the head with his observation that, "[we last raised] the fuel tax … 13 years ago. And now here we are trying to accomplish 2009 goals with 1996 dollars. Everyone in this room or listening to me throughout Idaho today -- everyone who has a household budget or runs a business -- knows that just doesn't work".
In response to this problem, Idaho Governor "Butch" Otter has recommended bumping the gas tax upward by 2 cents in each of the next 5 years. Addressing the root of the problem even more directly, Wisconsin Governor Jim Doyle has proposed indexing the gas tax rate to inflation -- a practice that had existed in Wisconsin up until 2006. Maine and Florida continue to index their gas tax rates today, with very favorable results in terms of providing each state with a somewhat more adequate and sustainable source of transportation revenue.
Importantly, the federal gas tax is not indexed to inflation, meaning that the Federal Highway Trust Fund is suffering from many of the same problems we see plaguing the states mentioned above. The federal gas tax has not been increased in over 15 years. President Obama's new Energy Secretary, Steven Chu, has previously gone on the record as supporting raising the gasoline tax. The views of Transportation Secretary Ray LaHood are not yet clear. What is clear, however, is that something will have to be done at the federal, as well as the state level, if gas tax revenues are to be restored to their previous purchasing power.
Of course, the gas tax is not perfect. Aside from the long-term issues arising out of improved fuel efficiency (which we need to begin planning for now), the regressivity of the tax is very worrisome, especially in these difficult times. Fortunately, low-income gas tax credits, as we've advocated on multiple occasions, are very capable of remedying this shortcoming.
Thankfully, the Washington-based Economic Opportunity Institute presented more responsible ideas this week that add a much-needed progressive voice to the otherwise bleak landscape. Among their proposals are a variety of expansions in the state’s sales tax base, a tax on high-income earners, and a tax on oil companies’ profits.
Along similar lines, as Florida's budget situation continues to worsen, Republican legislative leaders have announced a special January session to deal with a $2.3 billion budget deficit for the current year. Options on the table include spending cuts and raiding trust funds -- but tax hikes have been explicitly ruled out by legislative leaders. Democratic lawmakers are showing renewed interest in hiking the state's cigarette tax -- even though the projected yield of such a hike has fallen dramatically in the last year. One editorial observer points out that avoiding sensible tax-raising solutions amounts to "eating the seed corn."
While reports such as those out of Iowa and Virginia (see “Budget Fixes Worth Embracing”, in this week’s Digest) highlight some of the best ways for states to dig themselves out of their current budgetary nightmares, in many cases it appears that the cigarette tax is continuing to hold on to its title as the single most popular tax to increase among the states. Policy advocates and even many legislators are often careful to frame their support of cigarette tax hikes in terms of fighting smoking or reducing health care costs, but in times as desperate as these, it’s hard not to suspect that revenue needs may be the driving force. The fact is that revenue from the cigarette tax is almost never sustainable over time because the
The three states with the most intense cigarette tax debates at the moment are
As the fiscal contagion spreads among the states, policymakers are clearly casting about for ways to close large and growing budget deficits. In Nevada, Governor Jim Gibbons may be open to tax increases in light of a shortfall that is projected to reach $1.8 billion over the next two and half years, but he has also floated the idea of 'voluntary' payroll reductions of 5 percent. New Hampshire faces an approximately $600 million budget gap over the same period, with lawmakers weighing such options as selling state properties, legalizing gambling, or deferring needed payments to the state pension fund. Florida may have to confront an eye-popping deficit of $6 billion over just 18 months, driving elected officials to think about raiding a variety of trust funds and imposing a 4 percent across-the-board cut in agency budgets.
Of course, these three states have more in common than difficult days ahead. They also share a steadfast refusal to levy a personal income tax. Rather than continue to cast about for half-measures and temporary fixes -- or, worse, policies that would undermine working families' already precarious economic situations -- policymakers in states like Nevada, New Hampshire, Florida, Washington, and Tennessee need to acknowledge the elephant in the room and consider whether the tax policies that brought them to this point are the ones that will carry them to a better future.
Florida, a state with one of the most obviously unfair and criticized tax systems in the nation, ranks 5th in overall business tax climate. According to the authors of the report:
"[Florida is] one of just four states to rank in the top half on all five tax-specific indices. Even Florida's much-maligned property tax system ranks fairly well, scoring 19th out of 50 states. Of course, improvements can be made to any state's tax code … but Florida is in a better position than most states to be content with the tax code it has."
A property tax that ranks "fairly well"? Content with the tax code it has? These assertions should come as a great surprise to anyone familiar with Florida's tax system. As has been documented at length in previous Digest articles, Florida's tax system is both unfair and inadequate.
Multiple rounds of budget cuts have become the norm each year in the state. Oddities with the property tax system have forced neighbors with similar homes to pay vastly different amounts in property tax. And all the while, the rich have been let off the hook despite vast income inequality in Florida.
In large part as a direct result of some of the abovementioned flaws with its tax code, a number of problems are immediately visible in Florida's quality of life. According to the Florida Center for Fiscal and Economic Policy, Florida ranks:
- 50th in per capita funding for higher education
- 49th in all education funding per capita
- 41st in state health rankings
- 49th in percent covered by health insurance
- 46th in Medicaid spending per child
- 2nd highest in percentage of uninsured children
- 48th in progressiveness of major state & local taxes
It's hard to imagine unhealthy and poorly educated workers being good for the state's "business climate". A tax system that fails to adequately fund these services should not be ranked among the best in the nation for business. In reality, Florida has an even longer and tougher road to travel than most states before it should be "content with the tax code it has".
The Florida Circuit Court ruling we reported on last month was upheld by the state’s Supreme Court this week. As a result, the ill-conceived ballot proposal seeking to slash school property taxes will not be presented to Florida voters this November. The body that put the measure on the ballot -- The Taxation and Budget Reform Commission -- is not scheduled to meet again for another twenty years. That means the only option for enacting a property tax cut of the kind Florida has been stubbornly pursuing is to go through the Florida legislature. While it’s not yet clear what the results of traveling down that path will be, it’s fair to say that the cut, as proposed by the Commission, will not be adopted. Former state Senate President John McKay believes that “the effort, as it’s currently conceived, is dead”. The cries for property tax cuts aren’t likely to face a similar demise anytime soon, however, and new developments from Florida seem inevitable in the coming weeks and months.
Four of the nation’s most populous states, together home to more than one out of every four Americans, are facing serious budget problems. Important new developments occurred in each of those states this week, the theme of which is perhaps best conveyed through California Republican Mike Villines’ question: “How many times can we say no to taxes?” State residents will soon learn that this is really saying "no" to keeping alive public services like education, transportation and health care that families depend on.
See the following posts on the budget situations in California, Florida, New York, and Virginia.
Raising taxes to help fill this shortfall appears to be completely out of the question. The likely solution will involve some combination of
- Relying on the $300 million the legislature set aside last year.
- Making permanent Governor Crist’s order to cut state agency budgets by 4%, saving up to $1 billion.
- Tapping into reserves contained in the hurricane recovery fund (apparently ignoring the potential costs of Tropical Storm Fay) and health care endowment, which have about $1.6 billion available.
Lawmakers could, of course, also convene in a special legislative session to make the needed adjustments, though election-year politics make that option extremely unlikely.
Perhaps more important than how Florida will fix its budget this year, however, is how it will address the inevitable shortfall looming next year. State economists are projecting revenues to be $2.2 billion lower than was originally thought. Tapping into reserves this year will only reduce the number of options available next year, and with cuts in vital programs already having gone quite deep, that option will undoubtedly be even more painful next year. Perhaps the dire situation on the ground in Florida will eventually begin to loosen the seemingly unshakeable grip of anti-tax advocates in the state. On a somewhat encouraging note, the Orlando Sentinel this week even ran an editorial suggesting something previously unheard of in Florida… an income tax!
