State proposal to eliminate business tax draws protest from local governments

State lawmakers have proposed two bills — House Bill 4025 and Senate Bill 760 — that would repeal portions of a state law allowing local governments to levy a local business tax. Once collected, those taxes usually are considered general revenue and help bolster a local government's shrinking budget.

— A tax used by local governments to boost revenues could be on the chopping block during the 2012 legislative session.

State lawmakers have proposed two bills — House Bill 4025 and Senate Bill 760 — that would repeal portions of a state law allowing local governments to levy a local business tax. Once collected, those taxes usually are considered general revenue and help bolster a local government's shrinking budget.

"It's a very big deal," said Amber Hughes, a legislative advocate for the Florida League of Cities. "The bill completely zeros out the revenue stream."

Naples brings in about $230,000 a year in local business taxes, all of which are deposited into the city's general fund, or main operating fund.

The tax is based on the type of business and several variables, such as the number of employees or the number of tables at a restaurant. Naples, for example, mandates that a state-licensed restaurant with up to 50 seats pay about $57 a year, while a beauty shop would pay about $23 per chair up to two chairs.

The standard annual rate in Naples is about $67.

"The whole purpose is to help keep taxes lower and spread the cost of government," Naples City Manager Bill Moss said.

Local business taxes bring in about $128 million a year to cities across the state.

Local business taxes bring in about $128 million a year to cities across the state. But it's not just cities benefiting from the ability to charge a business tax.

Cragin Mosteller, a spokeswoman for the Florida Association of Counties, said 37 counties in Florida charge a local business tax, and repealing the state law would have an annual effect of about $32 million on county budgets.

Collier County is one of those counties that collects a local business tax, and John Torre, a Collier government spokesman, said the county's unincorporated general fund received $571,945 in fiscal 2011 from the tax.

That was down from the previous year when the general fund received more than $705,000.

"This revenue is unrestricted and can be used for any purpose," Torre said.

Eliminating the ability to levy the business tax would be a significant hit to governments already struggling to balance their budget, Mosteller said.

"You add that on to the other hits and it's a dramatic impact that those counties will have to face," she said. "This is fundamentally a decision of home rule."

That impact is something some state officials already have recognized.

According to a state House of Representatives staff analysis, while the state's revenue estimating conference estimates the bill "would have no impact on state government revenues" it does state that repealing it would negatively affect local governments annually by "$156.4 million beginning in (fiscal) 2012-13."

Rep. Matt Hudson, R-Naples, wouldn't comment on whether he would support the bill, but said it is something that will be scrutinized this session.

Matt Hudson

Matt Hudson

"You can be sure it's going to be vetted extremely well," he said.

The bills may be considered a county or municipal mandate, and the House staff analysis states if that's the case final passage must be approved by a two-thirds vote.

"It's a state bill and it's another unfunded mandate to put on to the over 1,950 that have been passed since 1968 by this state," said Bob Lee, executive director of the Center for Florida Local Government Excellence at Florida State University in Tallahassee. "It doesn't impact the state budget one bit ... financially it has another impact during a time when (revenues are) decreasing every year."

But Hughes said it's not just the threat of eliminating local business taxes that has the Florida League of Cities, and cities across the state, concerned. Hughes said cities are also concerned about a potential threat to eliminate a local communications services tax.

That tax — which is generally tacked on to a cellphone or home phone bill — brings in about $400 million a year to local governments across the state, Hughes said.

Naples brings in about $2.4 million a year from its communications tax, 90 percent of which gets deposited into the city's general fund. In fiscal 2011-12, that sum accounts for about 6 percent of the total general fund budget.

"That's a big chunk of money," Hughes said.

While no specific bill has been filed to eliminate the communications tax, Hughes said there are a couple of different proposals that address the tax.

"Both of these are revenue sources and they are general revenue sources," Hughes said. "That's the concern."

(Staff writer Ben Wolford contributed to this report.)

__ Connect with Jenna Buzzacco-Foerster at www.naplesnews.com/staff/jenna-buzzacco

© 2011 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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