Diary

“Smart Cap” Protecting Florida’s Economy

WHAT IS SMART CAP

“Smart Cap” is a proposed law in the State of Florida that limits or “caps” state government revenue and spending to the previous year plus an increase for inflation and population growth. The most recent bill can be found on the link below;

http://flsenate.gov/data/session/2009/Senate/bills/billtext/pdf/s1906.pdf

The bill focuses on revenue and spending because government has turned to “revenue enhancements” to raise money outside of traditional taxes. By limiting revenue and spending Smart Cap will ensure predictable and reasonable growth in government.

Smart Cap is also known as TABOR, or the Taxpayer Bills of Rights. As House Speaker Marco Rubio attempted to pass TABOR but county governments were able to prevent its passage.

WHY WE NEED SMART CAP

To show you why we need Smart Cap we only need to look at the 2002-2006 period in Florida. State government spending increased from $37 billion in 2002 to $57 billion in 2006. A 64% increase in four years.

Even worse, while we increased spending we were increasing our debt at the same time. Our state debt went from $26 billion to $42 billion in just four years.

If we had Smart Cap in 2002 government spending would have been $14 billion less in 2006 and our debt would have remained almost constant at $30 billion.

What Happens Without Smart Cap

Without Smart Cap Florida will see dramatic increases in government spending similar to the 2002- 2006 period. Without Smart Cap Florida, taxpayers will be hit with higher taxes as property values rebound. Many governments have increased their millage rates by as much as 20% to keep the spending levels at their peaks. When property values rebound, those taxpayers will once again see a sharp increase in property taxes.

Without Smart Cap, Florida residents will see an increase in fees of all kinds. These “revenue enhancements” will come in the form of stormwater  fees, fire assessment fees, and increases in fees for parks and recreation.

And without Smart Cap governments will continue to squeeze more and more disposable income from consumers hurting our economy.

 

Smart Cap and Our Economy

The most important reason to adopt Smart Cap is that it will protect our economy. If government is allowed to expand without limits, more and more resources will flow out of the private sector economy and into government.

When government spending increases faster than the salaries of private sector workers it reduces the disposable income of consumers and starves small business of revenue. This means high levels of government spending equals high unemployment.

While many people believe taxes are paid by rich people, the truth is state and local taxes are paid by the average citizen. Often those taxes are embedded in the cost of goods and services we buy. You pay these taxes when you buy your groceries, clothing, and utilities. Half of your grocery bill is embedded taxes and more than a quarter of your utility bill. And taxes on business suppress the wages of workers.

To see how government spending hurts our economy let’s look at Orange County’s budget. In 1998 the Orange County budget was $1.3 billion. In 2008 the budget nearly tripled to $3.5 billion. In 2008 the 14 governments in Orange County spent an eye popping $7 billion. We have 600,000 working taxpayers in Orange County. If we divide the $7 billion in government spending by our 600,000 working taxpayers they paid $11,666 in local taxes per taxpayer.

The average citizen in Orange County makes $37,707 a year. So our average taxpayer is paying 31% of their gross income in local government taxes. Milton Friedman, the most quoted economist of the 20th century, said the “total tax on a society is the sum of all government spending.” He understood the consumer pays all of the taxes in America. And these taxes are regressive and hurt the poor the most.

The reason the Florida economy went from 1st in our nation to 47th is because our local and state spending increased ten times faster than our wages. This reduced disposable income of the consumer and starved our small business economy of revenue. Conservatives understand low taxed and limited government is not just a slogan; they produce the strongest economy and highest standard of living for all Americans.

Florida is at an economic crossroads. We can either control the growth in government and return to economic prosperity or let government grow unchecked and extend the suffering of our citizens.

Smart Cap will ensure economic prosperity for the next generation in Florida. Without it we will see years of high unemployment and suffering by our citizens. Just imagine if Florida sees another 65% increase in government spending in four years like we did from 2002 to 2006. More taxpayers will lose their homes, more businesses will close, and more people will leave the Great State of Florida. Smart Cap is the only way to prevent these job killing tax increases from happening again.

Has Smart Cap Been Done Before

 Yes. Smart Cap has been made law in the State of Colorado in a law known as the “Taxpayer Bill of Rights” or “Tabor.” In 1992, the voters of the state approved a measure which amended the Colorado Constitution that restricts revenues for all levels of government (state, local, and schools). Under TABOR, the state has returned more than $2 billion to taxpayers.  Colorado’s economic growth in the years since this system was implemented has been well in excess of that of the U.S. average.  

And the best part about Smart Cap is it requires all excess revenue to be placed in a reserve or returned to the taxpayer. If we had Smart Cap in 2002 Florida would not have its current budget crisis. We would have billions in reserve to keep our classroom teachers on the payroll.

Smart Cap is good public policy.

Who is for and against Smart Cap

Smart Cap is opposed by government labor unions and their supporters.

SEUI, AFL-CIO, PBA, League of Cities, and Alan Grayson

Smart Cap is supported by property owners, small business, farmers, and Republican legislative officials across Florida including Senate President Mike Haridopolus  and Speaker Dean Cannon.

 

Conclusion

·        Smart Cap will place a limit on state and local government revenue and spending.

 

·        Smart Cap will require governments operate like a business with budgets and priorities.

 

·        Smart Cap will require voter approve for sports arenas.

 

·        Smart Cap has been successfully done before.

 

·        Smart Cap is opposed by government labor unions.

 

·         Smart Cap will ensure economic prosperity for the next generation in Florida.

 

 

·       Smart Cap will ensure government serves the people.

 Smart Cap is a smart idea whose time has come.