Grappling With Growth: Florida gets a tax hike

In his campaign to become only the second Republican Governor of Florida in this century, Candidate Bob Martinez offered a medley of the G.O.P.’s greatest hits, highlighted by such familiar classics as slashing the budget and cutting taxes. Floridians loved his tune and rewarded him with a resounding victory over his Democratic rival, Steve Pajcic, last November. Today, however, Governor Martinez is singing the fiscal-responsibility blues. The man who vowed to “sweat $800 million” out of the state’s budget has instead proposed tax hikes totaling $850 million, the largest revenue increase in Florida’s history.

Martinez ruefully attributes his reversal to the “shock of reality.” Florida is the nation’s fastest-growing state and the sixth most populous in America (11.6 million residents). Yet it ranks last in per capita spending on human services and 47th in state and local taxes as a proportion of income. “The 895 new people per day who arrive in Florida to stay use water, waste water, need schoolrooms, use roads,” says Martinez.

Faced with a constitutional ban on a state income tax and stringent limits on property taxes, Martinez did not have a wealth of options for raising funds. He turned to the state’s 5% sales tax on goods. Rather than increasing the levy, he expanded its reach to include services ranging from advertising to warehousing. “About 80% of our economy is service driven and growing,” explains the Governor. “With a sales tax on commodities, you’re taxing only 20% of the economy.”

Democrat Sam Bell, chairman of Florida’s house appropriations committee, called Martinez’s flip-flop an “irony of major proportions.” The Governor, who switched from the Democratic Party to the G.O.P. in 1983, became the butt of pointed quips. “They said if I voted for Steve Pajcic, taxes would go up,” said wags. “Well, I voted for Steve Pajcic, and taxes are going up.”

Yet the tax hike won bipartisan support in the Democratic-controlled legislature. Most of the service-industry lobbyists who stormed the statehouse to fight the bill got the cold shoulder from legislators. The lawyers’ lobby won exemptions on fees of $750 or less for advisory services on an array of cases, including divorce and child-custody suits, but still planned to bring suit against the tax. The threat did not intimidate Dempsey Barron, chairman of the Florida senate rules committee, who called attorneys “the greediest, most soulless, heartless, blood-sucking bunch of people I $ have ever been associated with.”

Last week the state senate and house approved the tax hike. By breaking his campaign promise, Martinez has won plaudits from Democratic legislators and grudging respect from Republicans, who are relieved he never uttered those dreaded words income tax. But Martinez wants to make sure this monster increase will be his last. “I am prepared to take an unpleasant dose of tax medicine this year,” said the Governor, “but I do not intend to do it year after year because we did not do it right the first time.”