After Gov. Rick Scott’s highly prioritized manufacturing tax cut passed the Florida Legislature without receiving a two-thirds vote majority, legislative staff analysts have had a change of heart and now believe such a supermajority was not necessary.
Last month, staff analysts in the Florida Senate said emphatically that a two-thirds vote was required, because the proposed sales tax exemption for manufacturing equipment would put a significant dent into local government revenue.
“Therefore, this bill requires passage by 2/3 of the membership of each chamber,” the legislative analysis dated April 2, 2013 states. The House analysts also raised the two-thirds vote as a possibility, and a top official in Scott's office told the Herald/Times in February he believed a supermajority vote was required.
On May 2, an amended version of the bill cleared the House in a hurriedly cast 68-48 vote, with all Democrats and a few Republicans voting against it. Despite falling short of the 80-vote supermajority previously cited, House Speaker Will Weatherford, R-Wesley Chapel, quickly declared the bill passed, and brushed aside concerns about its constitutionality. Democrats immediately promised to sue.
“We think it is extremely constitutional,” Weatherford said after the contentious vote, stating that he had discussed the issue with legislative legal staff. He followed up with a statement asking “Who would sue to stop a tax cut”?
Now, the non-partisan legislative analysts in the Florida House have backtracked from their initial claim that the bill might need a two-thirds majority and have fallen in line with the House Speaker’s position on its constitutionality.
An updated staff analysis from the Florida House, dated May 15, strips all references to Article VII, section 18 of the Florida Constitution (the portion protecting local governments from unfunded mandates). All previous staff reports had at least cited the constitutional clause, highlighting the requirement for a two-thirds majority vote when local government revenue is at stake. The Senate had been more definitive about the 2/3 vote requirement than the House, and a new analysis was not done by the Senate.
A spokesperson for Weatherford said final bill analyses traditionally do not include information about constitutionality.
Whereas initial staff analyses mentioned Department of Economic Opportunity estimates of up to $115 million in lost revenue for the state, the updated review does not cite any cost figure. DEO has estimated that the tax cut could cost cities and counties up to $26 million per year.
The final bill analyses does not cite those numbers, or any others, only stating that “it is not anticipated the provisions would significantly affect the authority of the counties and municipalities to raise revenue in the aggregate.”
The words “significantly” and “aggregate” are key, because the Constitution requires a two-thirds vote for any bill that has a significant impact on local governments revenue-collecting abilities. A sales tax cut for manufacturers will likely reduce the amount of revenue coming in to local government coffers.
Under the bill, the revenue loss for local governments—estimated at $13 to $26 million per year—far exceeds the $1.9 million threshold needed to qualify as a “significant” impact. But the Legislature's legal team has seized on the term “in the aggregate” to justify the bill’s constitutionality.
"Based on our staff's estimate, it does not have a significant impact," said Ryan Duffy, a spokesperson for Weatherford.
Case law on the issue is not definitive, so a lawsuit could set a legal precedent for the future.
Of note, the bill has changed since the first staff analyses, but the final version would still have a annual impact on local government revenue. Under the original bill, the sales tax cut would have kicked in this year and lasted forever. The updated bill creates a three-year tax cut period starting in 2014. It could save manufacturers more than $140 million per year, when state and local tax savings are combined.
The proposal was one of Scott’s top priorities for the 2013 session, as the governor said eliminating taxes on machinery will help “build up” manufacturing jobs in Florida.
Scott, who is expected to sign the bill soon, recently wrapped up a “victory tour” across the state to celebrate the bill’s passage.
“Manufacturers in Florida have been disadvantaged for too long because we were one of few states that taxed the purchase of manufacturing equipment,” Scott said in a statement. “With this legislation, Florida is now on a level playing field.”
He added “I look forward to signing this bill into law.”