by Sean McManus
Staff Writer
When a Florida appeals court in Tallahassee voted last week to keep a constitutional amendment calling for a widespread review of sales tax exemptions off the November ballot, it was an example of the power the state’s real estate community wields over public policy.
While the coalition assembled against the measure — called Amendment 5 — represented a vast array of industries from truck drivers to hair dressers, the Florida Association of Realtors and its 80,000 members took the lead against it, and FAR’s vice president for governmental affairs, Gene Adams, got much of the credit for its defeat.
The idea, pushed by Senate President John McKay and couched simply as tax reform, would have enabled the Florida Legislature to elect a 12-member panel of lawmakers to review and vote to eliminate any of the hundreds of tax exemptions now on the books, which range from accountant’s fees to real estate services.
According to Jacksonville’s Russell Grooms, who is treasurer of FAR, the largest trade organization in Florida, his group was prepared to spend over $800,000 to sway public opinion against the measure had it gone to ballot. That’s on top of the countless sums that had gone into lobbying efforts during the year-long battle in Tallahassee.
“All 68 local associations were reaching into their pockets to make sure this didn’t happen,” said Grooms, who works for Watson Realty when he’s not representing FAR locally. “We’re not opposed to tax reform, but this was just bad government.”
Nancy Garcia, who is the head of government affairs for the Northeast Florida Association of Realtors, was in charge of mobilizing Jacksonville for a massive campaign if Amendment 5 had gone to ballot.
“We had an e-mail bulletin ready,” said Garcia. “We were making signs and and we were ready to tell our all family and friends to vote against this thing. Luckily, it didn’t get that far.”
What realtors and others saw in Amendment 5 was what amounted to an income tax — something Florida has always vigorously opposed. But in public, real estate agents weren’t clamoring about their own bank accounts. They would talk about how Amendment 5 was going to negatively impact affordable housing as agents passed the new costs on to the consumer.
According to Charlene Perez Ferren, the NEFAR president, economic statistics prepared for Watson Realty revealed that every $1,000 a house goes up in cost, 18,000 more people can’t afford it.
“That’s a pretty huge impact of a tax,” said Perez Ferren. “Especially in a city that is trying so hard to make housing affordable.”
Perez Ferren said that when NEFAR heard about how dramatically the tax could affect real estate agents, it voted to raise the level of spending for local grassroots lobbying efforts from $7,500 to $20,000. “We would have run ads in local papers, we would have bought air time on television, we would have done whatever needed to be done to make voters aware of how this could hurt everybody in Florida.”
But all the money that FAR was ready to spend, they can now save for the next tax battle. Late last Friday, the Florida Supreme Court refused to review the appeals court’s decision, putting the issue to rest only hours before local election officials prepared to print and mail absentee ballots to overseas voters. It was a huge victory for service-based industries and a huge defeat for McKay, who vowed to revive the issue next legislative session.
Adams, who has been the head of governmental affairs for FAR for 17 years, said that his legal argument was based on three basic principles.
“The ballot summary was misleading,” said Adams, who works in FAR headquarters in Tallahassee. “The way was written, it was confusing as to what voters were actually voting for. In legalese, that’s called ‘hiding the ball.’ ” And it was that feature of the proposed law that most troubled the appeals court. The decision stated that Amendment 5 was unclear and ambiguous.
But Adams also thought the legislation didn’t clearly apprise voters that this was calling for a change in the State Constitution, which currently requires that changes to the tax code pass review by the legislature and the governor — not a handful of elected representatives. Adams also argued that the law was unconstitutional on the federal level because it violated the concept of one person, one vote.
This year’s tax battle reminded realtors of a similar push in 1986, when the legislature wanted to put a tax on services. The bill was enacted and then quickly repealed.
“People need to realize that if a realtor lists a house for $100,000 and an offer comes back for $98,000, then we are required by law to tell the owners of that new price,” said Grooms. “If the owners go for it, then that’s money off commissions. Not many other industries have those kinds of controls that regulate potential income.”
In statements published last week in The Tallahassee Democrat, McKay said he will fight for similar reform in the future. Saying that the current tax code was full of unfair exemptions that made the system vulnerable to economic swings, McKay called children’s futures “more important than special-interest tax breaks.”
“We’re not opposed to reforming the tax structure,” said Adams, “we just want there to be a full review when there is.”
Saying that doing away with exemptions is tantamount to a slippery slope toward a Florida income tax, Grooms said that he and FAR realize the state needs tax reform.
“We have more and more people moving here,” he said, “and we have to invest in infrastructure. But the general consensus here is that sales taxes are the most fair. Not arbitrary service taxes on people for whom service is their only income.”
Perez-Ferren said that realtors already pay heavy fees associated with title transfers, closing costs, survey and appraisal costs, and mortgage fees.
“The whole idea is that we already pay more than our fair share,” she said. “Fortunately, the courts agreed.”