July 09, 2007

Florida: Proposition 13 Redux?

Survivors of California's "Proposition 13" tax revolt know that good intentions can go bad pretty fast. In particular, the lesson Californians have learned is that when you force unaffordable local property tax cuts, locals usually can't just reduce their total revenues by the full amount of the cut. Some of the property tax cut will have to be made up through hikes in other taxes or fees. And the most likely outcome is that the revenue will be made up in a way that's less visible- instead of one big tax, a lot of little nickel-and-dime stuff.

There's evidence emerging already that this is exactly what's going on in Florida, as local governments deal with the state-mandated property tax cut passed in a June 2007 special session. Florida Today has the story:
Facing a property tax shortfall of $4.1 million, city leaders may start enacting a minor tax on residents for drinking water,taking showers and filling swimming pools.
After more than an hour of debate recently, the Melbourne City Council decided to pursue a new 10 percent utility tax on water sales.
This is nothing new in Florida, of course. Local government collections from utility taxes on electricity, water and other utilities are estimated at about $1 billion for fiscal year 2007. Even in Florida, that's some serious money.

The question is, how can this tax swap be justified on fairness grounds? Lawmakers have demonstrated an (arguably sensible) aversion to taxing what they consider "necessities" such as food and utilities. The city of Melbourne is about to take exactly the opposite step, taking a path that many other Florida municipalities have already followed.

Of course, a tax on water consumption will hit businesses too. But that was also true of the property taxes the city will no longer be able to collect this year as a result of the state's actions in June. So this can't really be justified as an effort to make businesses pay more-- not that any city council member in Melbourne would have said so anyway.

The truth is most likely that Melbourne is taxing water because it's the tool that is available to them. They're doing it because the alternative is painful cuts in the services the city provides to its constituents.

This may be smart politics, at least for state lawmakers. But it's dumb policy-- and it's a policy that will inevitably make Florida's tax system even more unfair.


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