The Republican-controlled Florida House voted largely along party lines Wednesday for a measure that would swap homeowner property tax relief for higher sales taxes.
The proposed state constitutional amendment, which would go on the November 2008 ballot if it gets Senate approval, could make Florida the only state in the nation without either a personal income tax or property taxes on primary homes, known as homesteads.
Republicans called it the state's largest-ever tax cut - a net of $25 billion to $35 billion over the first five years even with the sales tax increase. They said it's wrong to tax "the American Dream" and that the proposal would make housing more affordable for low-income residents.
"Our plan will save the average homeowner $2,300 per year - annually - for the rest of their lives," said Rep. Dean Cannon, R-Winter Park. "The essentials of life in this state have a tradition of not being taxed with one horrible exception."
Current law exempts food and medicine from sales tax, yet homes are subject to property tax, noted Cannon. He is a House policy council chairman who will lead the chamber's property tax negotiations with the Senate.
Democrats argued the sales tax part of the swap would amount to the largest tax increase in the state's history and shift the tax burden from Florida's wealthiest citizens to some of its poorest.
"People don't expect a free ride, but they ought to demand that they pay only their fair share," said Democratic Leader Dan Gelber of Miami Beach.
Both chambers of the Republican-controlled Legislature are responding to an outcry for relief from soaring property taxes caused mainly by a sharp rise in real estate values over the past several years.
The House passed the constitutional amendment (HJR 7089) 78-40, six more votes than the three-fifths majority needed, with three Democrats breaking ranks to join Republicans.
Democrats, though, later joined their GOP colleagues to unanimously pass - 118-0 - a bill (HB 7001) that would roll back all property taxes to their 2000-01 levels and cap them with allowances for inflation and construction growth.
The chamber also approved two other tax reform bills. One (HB 261) modifying assessment practices passed 117-1. The other (HB 1483), which would limit the ability of local governments to increase other taxes and fees, passed 98-18.
All four measures next go to the Senate, which is scheduled to vote Friday on its own bipartisan tax reform package. The Senate plan lacks a tax swap and is estimated to save taxpayers $12.36 billion in the first five years, less than half as much as the House legislation.
Gov. Charlie Crist also made property tax relief a key issue in his campaign last year. He has not taken sides between the two chambers, but has said more is better when it comes to cutting taxes.
The House amendment would eliminate some or all property taxes on homesteads while raising the statewide sales tax from 6 percent to as much as 8.5 percent. The first 1 percent additional sales tax would be automatic in exchange for lifting the state-required property tax for schools. Local referendums then could be held to determine whether remaining property taxes on homesteads would be abolished in exchange for the remaining 1.5 percent sales tax increase.
The amendment also has a provision similar to the rollback bill, but it would send taxes back to 2003-04 instead of 2000-01.
The bill could go into effect this year. The amendment would then supersede the bill if voters pass it next year.
Gelber said Democrats unified behind the rollback bill to show their commitment to cutting taxes, although they were unsure how far back they should go. The Senate is advocating a one- or two-year rollback.
Gelber said negotiations between the chambers would determine the most appropriate rollback.
House Speaker Marco Rubio, R-West Miami, said opponents of the constitutional amendment, including two Republicans, will be remembered for voting against what would be the largest tax cut in the state's history,
"I'm not sure that voters are going to be forgiving," Rubio said.
The speaker, though, was not surprised by the amount of opposition to the tax swap idea.
"The bigger and bolder it is, the less consensus you're going to have," Rubio said. "It's never been our goal to have consensus."
His goal, instead, is to have just enough votes to pass the amendment, and if it gets on the ballot that would be a two-thirds majority. That's because the sales tax swap would fall under a constitutional provision that requires a two-thirds majority for a tax increase.
Other constitutional amendments require a 60 percent vote at the ballot box.
The three Democrats who crossed party lines to vote for the constitutional amendment are Reps. Luis Garcia of Miami Beach, Michael Scionti of Tampa and Edward Bullard of Miami. Bullard later switched his vote but the official roll call remains unchanged.
Two Republicans, Reps. Andy Gardiner of Orlando and Gayle Harrell of Stuart, voted against the proposed amendment. Rep. Don Davis, R-Jacksonville, who is recovering from surgery to remove a brain tumor, did not vote.