NFIB Letter to All Lawmakers, Sept. 12

A vote to tax services is a big mistake.

We understand that this week you may be asked to consider expanding the sales tax to some or all services with a 6 percent rate. Another option you may be asked to consider is to expand the sales tax to services and lowering the rate for a combined services/product sales tax.

We have also heard that the plan for doing this would be to increase the income tax now and allow the state's voters a choice on a statewide ballot to choose a graduated income tax or a sales tax on services -- but NOT a straight increase in the sales tax rate -- thereby leaving the graduated income tax or a services tax the only option.

We are very concerned that if you choose this course of action, both parties are going to lose in the court of public opinion because you are leaving the voters with a choice on two taxes that they loathe -- an income tax hike or a new sales tax on services. If you have any doubt about the public's reaction to a services tax, I strongly suggest you revisit Florida's experience in 1987:

"Florida has never recovered from the 1987 services tax debacle." Tampa Bay Times Editorial, March 25, 2007

"But before any other state could copy the idea, Florida backed down... and then-Governor Bob Martinez reneged on his support for the tax. He asked the Legislature to rescind the new tax law, which it did." From Governing Magazine's February 2003 issue

"Gov. Bob Martinez of Florida signing a bill passed by the Legislature that repeals the state's tax of services. The tax, which was opposed by businesses, will die Jan. 1 and the state sales tax will climb from 5 percent to 6 percent on Feb. 1 to make up lost revenue." New York Times, Dec. 12, 1987

"The most important development affecting other taxes was Florida's ultimately failed attempt to expand the sales tax to a broad range of services." Steven D. Gold,
National Conference of State Legislatures, Publius: The Journal of Federalism 1988 18(3):17-36

It has been said that those who do not remember history are condemned to repeat it. Do not repeat mistakes of failed tax policy. A recent survey of small-business owners conducted by NFIB indicated that they strongly believe the state should balance its budget with spending cuts just as they (business owners) have had to do during these difficult times. They also indicated that if a tax increase must be considered, an increase in the current sales tax would be the most preferred option. Sen. Mike Bishop's proposal of a one-cent sales tax increase coupled with spending cuts is a plan that, in our opinion, would be the most receptive option to the voting public. In that regard, a ballot proposal offering that as an option to rescind a legislatively passed income tax increase would probably raise the least amount of ire with most taxpayers.

We understand that EPIC-MRA did a poll in July that indicated that a services tax on "some" services was the preferred option for the general public. You need to examine that poll carefully before reaching the same conclusion. You can download the full poll. The poll question asked is worded as follows: "Expanding the current state sales tax rate of 6 cents on the dollar to many services not currently taxed, such as haircuts, lawn care, dry cleaning, car repair, tickets to movies and sporting events." First of all, this question does not include all of the services currently under consideration and, second of all, it is proposed against a sales tax increase option of two cents not one cent on the dollar. Here is that option as a question from the poll: "Increasing the state sales tax on the purchase of good from the current rate of six cents on the dollar to eight cents." We suspect that a poll including a straight services tax question against a lower sales tax option would come out significantly different. The EPIC_MRA May poll is more instructive in that regard in that poll a straight up sales tax increase is the most favored option followed by the income tax. A services tax is one of the least favored options. Finally, remember that polls on the governor's "two-penny" plan showed little public support.

We do not envy the task before you and we again ask that you do not support efforts to expand the sales tax to services in any manner.

Thank you for support of small business!

Say No to New Taxes