Bush still backs tax cut in coming year
Published: Wednesday, January 1, 2003 at 6:01 a.m.
Last Modified: Wednesday, January 1, 2003 at 12:55 a.m.
TALLAHASSEE - This New Year's Day may be the last time that thousands of Florida investors and businesses are forced to pay the state's 72-year-old tax on investments.
Despite a looming budget crunch in the coming year, the state of Florida still plans to hand out a $130 million tax cut to as many as 335,000 individual and married investors and more than 96,000 businesses.
State legislators in the spring of 2001 agreed to slash the number of investors who must pay the state's intangibles tax charged on stocks and bonds. But in November 2001 legislators decided to delay the timing of the tax cut to help erase a $1.3 billion state budget deficit.
When legislators return this spring to Tallahassee they will confront yet another tough budget year, but Gov. Jeb Bush says he is opposed to delaying the tax cut any longer.
''I think everybody ought to recognize it was deferred for a year to get us through the dramatic temporary drop in revenues,'' Bush said. ''But this is good policy when you consider the fact that this is a raising of the exemptions. These are small savers. These are people whose life savings have been hurt by the stock market. And it makes all the sense in the world to give them a break.''
Bush's opposition is significant since the governor could veto any effort by lawmakers to push back the timing of the tax cut that officially takes effect on Jan. 1, 2004.
Legislators who come to Tallahassee in March must pass a state budget that covers state spending from July 1 of this year to June 30, 2004. But unless lawmakers decide to cut existing programs in health care or education, they will have just $21 million extra to cover growth in public school enrollment and programs such as Medicaid.
Legislators likely will be forced to either cut state spending, raise taxes or raid state reserves in order to balance the 2003 budget. Lawmakers also could raise more money by allowing dog tracks and horse tracks to expand their gambling operations. It could be hard politically for legislators to explain why they cut money for the elderly or the poor while handing out a tax cut for investors.
Senate President Jim King, R-Jacksonville, has not mentioned the intangibles tax cut specifically, but he already stated he is willing to look at any way to solve the budget crunch.
"I don't think the Senate is saying we need new taxes," King said last month. "We are going to prepare ourselves for the alternatives. We're going to look at everything. We're not going to say no automatically.''
Florida first began charging the intangibles tax back in 1931. Viewed initially as a ''soak the rich'' tax, the tax is one of just two state taxes that are aimed primarily at the wealthy.
The GOP-led Legislature and Bush have been on a crusade the past several years to eventually eliminate the tax, saying it unfairly punishes ''seniors and savers'' even though the tax does not apply to retirement investment accounts, U.S. Treasury bonds or bonds from the state of Florida.
Investors and businesses are required to pay $1 for every $1,000 in assets they own on Jan. 1 of each year. The most recent numbers from the Department of Revenue from 1999 showed nearly 700,000 investors or businesses paid the tax.
Those with small portfolios are already exempt from paying the intangibles tax. Currently, the first $20,000 in assets held by an individual or $40,000 held by a couple is exempt from the tax. The state also doesn't require anyone to pay the tax if his or her total bill is less than $60.
So the reality is that individual investors must own $80,000 in stocks and bonds and couples must own $100,000 in assets before they have to pay the intangibles tax. But those exemption levels will rise dramatically if lawmakers do nothing during the 2003 session.
After this year, individuals and businesses with $250,000 or less in assets will no longer have to pay the tax. Couples with $500,000 or less in assets would also be exempted from paying the tax. Department of Revenue estimates show that this would eliminate more than 64 percent of those who currently pay the tax.
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