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Florida Considers Tax Swap

by William C. Coleman III, Orlando, November 2015

 

A proposal to reduce or eliminate property taxes in exchange for higher sales taxes is being considered by Florida lawmakers. If the idea wins enough support, it will be introduced in the 2016 legislative session.

 

By the Numbers

 

Three different options are under advisement. If property taxes were completely eliminated, committee records show the sales tax would have to go from 6% to 12.72% to cover existing state, local, school, and special district expenses.

 

Enacting a tax exemption on the first $1 million of a property's appraised value would require the sales to be increased by 4.93%. Analysts say this would impact 98% of all residential and business property in the state.

 

The sales tax would have to grow by 4.36% to replace a tax exemption on the first $500,000 in assessed property values. This would be enough to keep 95% of all property owners in Florida from paying property tax.

 

Pros and Cons

 

The Florida House Finance and Tax Committee is hearing both pros and cons relating to a tax swap.

 

Opponents say raising sales taxes to lower property taxes would disproportionately hurt the poor. "Poor folks spend eight times more of their income on sales tax than those who are not in poverty," said Representative Randolph Bracy. "Would I want my property tax lowered? Absolutely. But shifting it to sales tax concerns me."

 

Representative Matt Caldwell argued that poor people would not be hurt since the state fully exempts most food, rent, and medicine from sales tax. "If you are only buying the things you need, and no longer have to pay any property tax, you can live exclusively tax free in the State of Florida," Caldwell said.

 

The Florida House Finance and Tax Committee plans to review the impact of a tax swap on state and local revenue before any measure advances.