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Sticking It To Business
There's a municipal utilities tax of 7% to 10%; a gross receipts tax of 2.5%; a 7% state sales tax; a local franchise fee; a local option sales tax, usually a maximum of 1%, plus federal levies.
Business pays the highest rates, according to Tallahassee attorney Robert Goldman, because residential customers are exempted from the state telecommunications sales tax. Add it all up, and Florida commercial customers pay average taxes on their telecommunications bills as high as 18.5%. "Which is extraordinarily high compared to other places around the country," Goldman notes. "If Florida wants technology-related businesses to locate here, it should not be taxing the services those businesses buy at the highest rates in the country."
But the growing calls for change probably won't get through to state legislators, who usually are much too busy worrying about re-election to bother with the state's economic future.
Observers say it's possible lawmakers will rouse themselves long enough to streamline the telecommunications tax structure, making it somewhat easier and cheaper for the industry to keep track of all the levies. But the prospect of reducing the state's crippling dependence on telecommunications taxes by finding other revenue sources appears all but nil, thanks to the Legislature's refusal to raise taxes. It's even more unlikely that the Legislature will attempt to balance the levies placed on commercial and residential customers. No other state exempts residential customers from the telecommunications sales tax, analysts say.
About the best to be hoped for is expansion and simplification of the base on which telecommunications taxes are collected, mostly by including cable and wireless technologies in more of the levies. It's also possible that the different state and local taxes will be combined into a simpler unified tax. Cities and counties would get their money back through a distribution formula.
Even that modest reform is meeting stiff resistance from local governments, however. With few taxes at their disposal now, they're reluctant to part with the power over such an important tax. (For some cities, utility taxes are the second biggest revenue source.) Cities and counties also are understandably worried that the distribution formula for utility taxes - like the school funding formula - will become subject to regional politics in the Legislature.
"There are only limited resources that local governments have, and before you do a wholesale revision, you ought to look at the entire tax structure," argues Kelvin Robinson, a lobbyist for the Florida League of Cities.
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FLORIDA'S RICH UNCLE
An Estate Tax Windfall
The good news from Tallahassee is that somebody died and left you $74 million. The bad news is that the Legislature gets to spend it. And they'll probably use it as yet another reason to avoid tax reform this year.
The $74 million state estate tax collection - paid on a total estate that likely exceeded $300 million - came in August. At the Department of Revenue, no one was identifying the dear departed, or even confirming the collection. (Confidentiality rules and all that.)
But budget analysts were so thrilled they couldn't wait to tell legislators in December. "I don't think we'll ever see one like that again," crowed Ed Montanaro, head of the Legislature's Economic and Demographic Research division. Considering that the state's entire estate tax collection runs to only about $420 million in an ordinary year, Montanaro might be right. While many retirees believe Florida has no estate tax, the state does have such a levy. It's lower than that of some other states, but rises to a maximum rate of 16%. Estates receive a credit against their federal tax for the state tax payments.
The windfall was the icing on a sizable budgetary cake that legislators received in late 1996. A healthier-than-expected economy prompted upward revisions of collection estimates for several tax categories during the fall. Those revisions - totaling about $535 million - promise a partial respite from the social-services bloodletting that has become a kind of pagan ritual in legislative budget-writing committees each year.
Increases in housing starts, an upturn in tourism, booming auto sales and better corporate income contributed to the revised estimates - along with the demise of our wealthy anonymous benefactor.
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"NO ONE IS PREPARED"
Fed Balances Budget And Florida Pays
Meanwhile, many in Tallahassee are worrying this winter about the real prospect of a balanced federal budget, because the states will have to cut the federal programs they administer.
It's one thing for Washington politicians to speak bravely about bringing the federal budget into balance, they say, but with Florida's unrivaled dependence on federal entitlements, the potential for damage to the state's economy becomes ominous. "No one in this state is truly prepared for a balanced federal budget," says one legislative analyst.
Cuts will harm industries that feed on federal funds, such as healthcare and highway construction, and likely will force layoffs in state government and put more pressure on Florida's already-underfunded state retirement system.
The most comprehensive study showing the potential impact of national budget trends is one by the governor's Planning and Budgeting Office. Based on the June 1996 congressional budget resolution for 1997-2002, the study projects a 9% reduction in federal dollars to Florida compared to existing funding levels. That translates to about $6.2 billion over the six-year period. The drop is even worse than the 8% national average. Medicaid is expected to drop 10% over the period, highway construction 4%, cash welfare 11%, aid for exceptional children 9% and school lunch assistance 7%.
Another study suggests that the state could lose up to 250,000 jobs over the same period. Most of the losses would come from cuts in industries tied to Medicare, Medicaid and Social Security.
Yet another study suggests that the impact on Florida won't be that dire, because a balanced budget will prompt drops in interest rates that will spur the state's huge housing industry. Like a lot of rosy recent projections, it assumes unrealistically that the economy won't slide into one of its periodic recessions.
Moral: At a minimum, Florida's congressional delegation must better protect the state from federal cuts.
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RUNNING OUT OF ROADS
Turnpike Tempest
Six years after a major reform led to construction of several badly needed turnpike projects in central Florida, the system is nearing the end of its ability to build. So state officials plan to go back to the Legislature this year looking for changes that could lead to new projects.
The problem isn't lack of money; it's the inability of the turnpike system to make full use of the revenues it collects. Most of the money still comes from the original highway, known as the Florida Turnpike, which now runs from Wildwood in north-central Florida to Homestead in southern Dade County. Since the last of its construction bonds were paid off in the mid 1980s, the toll road has turned into a huge cash cow for the state's underfunded highway system. In 1990, the Legislature agreed to allow the state Department of Transportation to start spending the turnpike's quarters on new projects around the state.
The projects either built or underway include: Veterans Expressway near Tampa International Airport; parts of the Seminole Expressway near Orlando; the Polk Parkway in Polk County; and the Suncoast Parkway north of Tampa Bay. But bonding caps and tough financial feasibility criteria for new turnpike projects mean the state is running out of roads it can build. So state officials are expected to ask the Legislature to make new financial ground rules that could lead to many more new projects early in the next decade.
As usual in Florida, though, policymakers will have to contend with regional rivalries. Use of the toll money has generated criticism among south Florida commuters, who resent paying for new highways in fast-growing central Florida. The changes being sought by state officials likely would favor projects in south Florida, including commuter-friendly access points on the original turnpike.
Central Florida won't be ignored, however. Turnpike officials say the system's headquarters, now in Tallahassee, might move to the turnpike's Turkey Creek service plaza in Orlando. It's probably no coincidence that both the new House speaker and the new Senate president are from Orlando.
