For Immediate Release
January 27, 1999

Governor Announces $1.25 Billion Tax Cut; Largest Tax Cut in State History

TALLAHASSEE – Governor Jeb Bush announced today that his 1999-2000 budget will include a $1.25 billion tax cut package including tax cuts for individuals and businesses. The tax cuts will be the largest in Florida history and will wipe out tax increases from the early 1990's

"We will provide over one billion in tax relief to ease the tax burden on Florida's families and businesses in a fiscally responsible manner and on as broad a basis as possible," said the Governor. "The quality of our citizens lives and the prosperity of our state depends on allowing taxpayers to keep more of what they earn. Businesses and individuals should be free to invest and spend their hard earned money. These investments are the best way to create jobs and economic opportunity in Florida."

The tax reductions proposed by Governor Bush today are broad-based and provide the greatest benefit to low and middle income families and small businesses. In an era where families need two incomes to make ends meet, one of those incomes should not be consumed by paying taxes to government. Tax burdens on businesses, particularly small businesses, have to be minimized to allow for the creation and expansion of our economy.

The direct benefits to Florida's 6.1 million households are expected to total about $588 million, for an average of almost $100 per household. The total tax savings to Florida's 400,000 to 500,000 businesses will be about $648 million.

School Property Tax Relief

Compared to other states, Florida’s property tax burden has been increasing in recent years and is above the national average and well above our neighboring states in the southeast. It is not surprising that property taxes have consistently ranked among the most disliked taxes among Floridians.

An 11% reduction in the school property tax rate, from 6.509 mills to 5.792 mills, will bring the rate back ten years to where is was in 1989. The $480 million tax savings from the Governor’s proposal will bring Florida’s property tax burden below the national average and will be widely dispersed throughout the state's economy. An estimated 3.7 million Florida homeowners will receive an average benefit of $40 per year. About 330,000 commercial and industrial properties will save $418 annually.

Tax Rebate on Residential Utility Accounts

Property tax relief, while broad based, will not directly reach all of Florida's taxpayers. In recognition of the need to give relief to all taxpayers, regardless of income or property ownership, the Governor proposes to give a one-time $50 rebate of state taxes via a reduction in residential electricity billings. The plan will inject $376 million directly into the pockets of approximately 7 million residential utility taxpayers.

Intangibles Tax Reductions

Florida has the dubious distinction as the only state with a substantial tax on intangible personal property. It is a tax with many shortcomings. This tax punishes people who have made the sacrifice to save and invest their earnings to provide a better life for themselves and their families. In addition, the tax diminishes the only source of current income for many retirees living in the state, posing a hardship for those depending on a modest life savings to support them in their later years. The tax is unfair in other ways, too, with problems ranging from unequal compliance to high administrative costs for less wealthy taxpayers. The uniqueness of the tax to Florida tarnishes our state's image as a business friendly place. For all of these reasons, the tax should be changed.

Governor Bush is proposing three major reductions in the intangibles tax, totaling $178.3 million. Together these changes will remove about 270,000 taxpayers from the rolls, a 36% reduction. Average tax savings among all intangibles taxpayers will be about $240 annually. First, the phase out, initiated last year by the Legislature, of the anti competitive tax on accounts receivable will be accelerated and completed in FY 1999 2000. Businesses are expected to save $80.2 million annually as a result.

Second, the personal exemptions on the first mill of the tax will be increased from $20,000 of property (individual filers) and $40,000 of property (joint filers) to $100,000 and $200,000, respectively. This exemption structure will be the same as that for the second mill of tax. An estimated 170,000 taxpayers will be completely removed from the tax rolls, with an average annual savings of $113. These are the people upon which the tax tends to be most burdensome and most costly. The remaining 340,000 non business taxpayers will have average tax savings of $117 annually.

The third component of intangibles tax relief is the creation of an exemption on $100,000 of property value for businesses. This would be identical to the exemptions available to individuals. It will completely remove about 102,000 small businesses from the rolls, with an average annual savings of $129. As is true with the changes in personal exemptions, these are the businesses upon which the tax tends to be very costly to administer in relation to the amount of tax remitted. Also, the smaller businesses tend to have less knowledge and resources available to legally avoid the tax. The remaining 129,000 businesses still paying the tax will have average annual savings of $200.

Unemployment Compensation Rate Reductions

Unemployment Compensation Rate Reductions In 1996, the Foundation for Florida's Future, under Jeb Bush’s chairmanship, initiated an effort that resulted in a one year reduction of unemployment compensation tax rates for most employers, saving taxpayers an estimated $172 million. Florida businesses were being taxed more than was necessary to support the state's Unemployment Compensation Trust Fund, the reserve from which all unemployment benefits are paid. Despite the tax relief which passed in 1996, this over taxation continues. Consequently, the Governor is proposing to re enact the temporary 0.5 percentage point reduction in most employer’s tax rates granted in 1997. Applying only to calendar year 2000, the full impact of $182.3 million will benefit 365,000 businesses for an average savings of $500. About 205,000 businesses will not pay any tax. These savings can go towards business expansion and job creation without endangering the solvency of the reserve fund. After accounting for the tax cut, the reserve fund's solvency is expected to continue to be better than average compared to the rest of the nation.

Taxpayer Bill of Rights

This component of the tax relief plan is intended to remedy unfair and inconsistent treatment of taxpayers with respect to overpayments and underpayments of taxes. With respect to tax overpayments, the Governor’s proposal is to pay market interest rates on refunded taxes to the extent that it takes the state more than 90 days to send the money back to the taxpayer. When a taxpayer overpays a tax, a refund from the state is due. At present, except for the Corporate Income Tax, the state does not pay interest to taxpayers for the time the state holds a taxpayer's money before a refund is sent. This is patently unfair to the taxpayer and should be corrected. The plan will allow a reasonable time for the state to process refund claims, while protecting the rights of taxpayers to be free of financial harm, if the state cannot process refund claims in a timely manner. This would bring the law as applied to all taxes administered by Department of Revenue into line with current law regarding the Corporate Income Tax. Interest payments on refunds should increase by $3.4 million as a result.

With respect to tax underpayments, the Governor is further proposing that the interest rate charged by the state on delinquent taxes be set at market rates. When a taxpayer underpays a tax, there are usually penalties and interest due on that unpaid tax. Currently, with the exception of Corporate Income Tax, interest charged by the state on underpayment of tax is set at 12 percent. At current market interest rates, the 12 percent charged by the state is excessive and punitive. Penalties already exist for the purpose of punishing violations of the tax law. Interest charges on taxes paid should not be punitive. The proposal will enhance taxpayer rights by eliminating the punitive nature of interest charges on underpayment of taxes. The FY 1999 2000 impact of this proposal is to reduce interest receipts from underpaid taxes by $15.1 million.

# # #