EMPLOYER Winter 2002 • Vol. 2, No. 1 F i n a n c e & T a x a t i o n Reviewing Exemptions the Right Way By Curt Leonard usher it through the legislative process. enate President John McKay (R- McKay defenders would point out, with Bradenton) is wending his way some justification, that the release of a bill of Sthrough Florida on a public speaking this scope simply lets critics pick it to pieces tour in an attempt to build support for before it ever gets a hearing. Liberating that reform of Florida’s tax structure. proposal to public scrutiny, however, makes In speech after speech, he is sharing his more sense from a political and a policy concerns about Florida’s current tax struc- standpoint. At the minimum, you find out ture, predicting tough times unless it is quickly whom your enemies are, which gives reformed, and promising a more stable fiscal you an opportunity to win them over by future for Florida if his plan is enacted. fixing any flaws in your proposal. Something His ambitious project could not come at a this complex can’t be rammed through the worse time, both economically and politically. Legislature. Quick on the heels of the December special In addition, the idea of tax reform in Florida What’s Inside session when they patched a $1.3 billion hole is akin to the Flat Earth Society announcing it in the 2001-02 fiscal-year budget, lawmakers will be looking for other options to explain Common Sense are now dreading a repeat of the exercise in our planet’s circumference: there just aren’t The Political Fires the 2002 regular session. that many alternatives. Florida’s constitution by Jon L. Shebel McKay’s tax reform efforts are akin to prohibits a personal income tax. It also bans changing a tire on a moving car: the timing is the state from levying an ad valorem property 440-34 or Fight all wrong. Substantive changes in tax policy tax on real property. Another constitutional by marian Stiles are best engineered during the good times, provision limits the growth in assessments on when the treasury is flush and people can residential property in order to prevent rapid Issue Roundup think with their heads, not when the elderly increases in property taxes. That leaves the by Curt Leonard are losing their Medicaid-funded prescrip- state’s consumption taxes, principally sales tion eyeglass-benefits because of budget cuts. taxes, as the only instrument sizeable enough Behind the While McKay has spent months promot- for “reforming.” Campaign Promises ing his plan, he began releasing the details Some of McKay’s objections to the sched- by Jacquelyn Horkan for public scrutiny only recently. This is a ule of exemptions from the sales tax do have nettlesome approach to shaping public merit: hair-care products are taxed, haircuts AIF’s Team of policy. Shielding the proposal from decision- are not; laundry detergent is taxed, dry Lobbyists makers inside and outside of government cleaning is not; lawn mowers are taxed, lawn until the last moment only complicates the care is not. The Business at Hand ability to win over the very people needed to (Continued on page 3) A publication of ssociated Industries of Florida Service Corporation C o m m o n S e n s e smaller core of people who want insurance but can’t get it for whatever reason, usually cost. A government program may seem the effortless solution to their dilemma, but the easy answers are rarely the best in a civiliza- tion and economy as fluid and complicated as ours. And then there the problems are so intrac- table that no political action can tame them, mostly because human nature is what it is. The Political Most of our bad habits and potential for failure are beyond the purview of lawmakers and bureaucrats, who, no matter what some Fires of them may believe, have no power to save us from our own mistakes. By Jon L. Shebel, Publisher Newcomers to Tallahassee experience an The headline caught my eye: “Caught initial shock at the haphazard and slightly between political fires: Kids who can’t read.” repulsive ways of politics. Some of the mess This particular item, by Orlando Sentinel arises from the nature of the problems we columnist Myriam Marquez, explored the present to politicians, expecting an easy fix. battle between lawmakers and school districts Some of it can be blamed on the fact that over the policy of social promotion, which everybody involved in the process has differ- allows children to advance to the next grade ent interests to protect, different definitions of whether or not they’ve mastered the skills, the issues, and different ideas about the best particularly reading, that they were supposed method for fixing them. Lawmaking is only to have learned during the past year. Lawmak- infrequently a zero-sum game, but on the most ers thought they had ended social promotion; meaningful legislation someone is always some school districts found a loophole that going to be disappointed by the results. EMPLOYER allowed them to continue its practice. Most of us eventually realize that, as ugly Published by No problem with a political solution ever as the system is, it works astonishingly well. Associated Industries really gets fixed because laws cannot be The rest never recover from the clash with of Florida Service written loophole-free. Solving one problem reality and remain somewhat like teenagers Corporation to inform usually creates another. We’re all caught abashed by the capacity of parents for embar- readers about issues pertinent to Florida’s between political fires because they are a part rassing their offspring. They usually end up business community. of our American culture. Unlike our enemies condemning politics for its very strengths. © 2002. All rights in the Middle East and elsewhere, who One of its unappreciated virtues is the snail reserved. govern through tyranny and violence, we pace of lawmaking. Haphazard remedies can PUBLISHER elect people and send them to city halls, state rarely be rushed through the Legislature Jon L. Shebel capitols, and Washington, D.C., to make the because the process of moving from sugges- ASSOCIATE PUBLISHER decisions about the issues affecting our lives. tion to statute is so tortuous. And it is that Stephen B. Trickey Many of the problems we elect them to way for our own protection. EDITOR solve just disappear. Remember the hullaba- So, the political fires burn. At Associated Jacquelyn Horkan loo about soaring gas prices during the Industries we’re there year after year with the DESIGNER summer of 2000? Now prices have dropped fire extinguishers on the ready to protect the J. Gregory Vowell to a three-year low without any help from the business community from the occasional EDITORIAL OFFICES government. We sometimes discover that our inferno and to fan the flames of our state’s 516 North Adams St. ■ Post Office Box 784 emergencies are simply misunderstood. Take economy. Tallahassee, FL the so-called health insurance crisis of the 32302-0784 1990s. Researchers discovered that most of Jon L. Shebel is president and CEO of Assoc- Phone: (850) 224-7173 Fax: (850) 224-6532 the uninsured were that way either tempo- iated Industries of Florida and affiliated E-mail: [email protected] rarily or by their own choice. There is a companies (e-mail: [email protected]). 2 Employer Advocate • Winter 2002 F i n a n c e & T a x a t i o n (Continued from page 1) ill advised. Yet some are absolutely necessary “Tax neutral,” Eliminating many of these silly and well- to Florida’s business community and the however, is a publicized exemptions, however, would economic health of Florida. Detecting the true somewhat barely make an impact on revenues. Elimi- nature of each exemption will take time and nating the exemptions on haircuts and dry calmness about the state’s finances. McKay’s misleading term. cleaning would pump a paltry $136.9 proposal allows neither condition to prevail. A lot of taxpayers million into the state treasury, an increase of The Senate president helped engineer the will pay a little less than one-tenth of one percent. When creation of a tax-reform commission that has less while a lawmakers look to pad sales-tax revenue, been meeting over the last year. He appointed they quickly find that the big pots of money several of it members, including himself. few of them, are in exemptions designed to prevent Another commission member is Randy primarily double taxation, or in items such as groceries Miller, AIF’s senior executive vice president. businesses, will and medicine. That means that exemptions The commission is recommending an pay a lot more. that apply to businesses provide the only approach to the reform of the state’s tax wiggle room for an increase in the sales tax. code that differs from McKay’s chosen route. McKay plans the repeal of a variety of Both the commission and AIF embrace current exemptions, with the exception of McKay’s contention that some exemptions are so-called basic needs such as groceries, without merit. While McKay seeks a wholesale residential rent, health-care services, pre- abandonment of all but a few exemptions, scription drugs, and basic telephone service. AIF and the commission are seeking a review He would also eliminate the alcoholic- of each and every sales-tax exemption on the beverage tax, the hospital-bed tax, and the basis of its public policy merits, without any intangibles tax. Everything else, apparently, predetermined conclusions.