Estimated Tax Reductions in Florida From 1999 and 2007

SummaryFrom 1999 to 2007 taxes in Florida were reduced by $19.3 billion (in 2007 dollars).

Data and AnalysisWith the exception of the estate tax cut (discussed below), all tax measures estimates are derived from the Fiscal Analysis in Brief.1 The Fiscal Analysis in Brief provides two-year revenue forecasts for all legislative measures affecting revenue during a legislative year. Legislative actions potentially affecting revenue could impact general revenue, trust fund revenue, or local revenue. The estimates presented below show the total changes from these three revenue sources combined.

The two-year revenue estimates include “cash” estimates reflecting the change in revenue in the two fiscal years following the legislative session. For example, the 1999 Fiscal Analysis in Brief contains cash estimates for changes in revenue for the 1999-00 and 2000-01 fiscal years. These data are presented in Table 1.

Table 1. Cash Revenue Changes (Nominal Dollars)

Legislative Year

First Fiscal Year Second Fiscal Year

Fiscal Year

Revenue Change(Millions

)Fiscal Year

Revenue Change(Millions

)1999 1999-00 -$802 2000-00 -$6852000 2000-00 -$450 2001-02 -$4582001 2001-02 -$95 2002-03 -$892002 2002-03 -$215 2003-04 -$1262003 2003-04 $176 2004-05 $962004 2004-05 -$92 2005-06 $1582005 2005-06 -$103 2006-07 -$722006 2006-07 -$272 2007-08 -$282

Some of these tax changes are temporary tax cuts measures. For example, sales tax holidays typically reduce taxes for only a single year. However, other cuts are “recurring” tax reductions. The revenue effects from these permanent reductions are not estimated beyond the two-year budget window. Table 2 provides the value of these recurring cuts as reported by 1 The Fiscal Analysis in Brief (available h ere ) is published annually by Florida’s Office of Economic & Demographic Research. The tax cut data used for this analysis originate from the table entitled “Measures Affecting Revenue and Tax Administration.”

the Fiscal Analysis in Brief. The second fiscal year recurring estimates are used. For example, in the 1999 legislative session recurring tax cuts totaled $660.3 million in the 1999-00 fiscal year and $681.7 in the 2000-01 fiscal year. The analysis presented below uses the 2000-01 recurring cut of $681.7 as better estimates for how the revenue measures in the 1999 legislative session would affect revenues in later years. Table 2 presents the second fiscal year recurring estimates for each legislative year.

Table 2. Recurring Revenue Changes

Legislative Year

Recurring Revenue Change (Millions)

Fiscal Year of Recurring

Amount

Total State and Local Revenue (Billions)

Recurring Revenue

Change as % of Total Revenue

1999 -681.7 2000-01 92.85 -0.7%2000 -452.4 2001-02 93.3 -0.5%2001 -138.5 2002-03 111.15 -0.1%2002 14.3 2003-04 129 0.0%2003 120.5 2004-05 132.25 0.1%2004 167.5 2005-06 135.5 0.1%2005 -66.4 2006-07 153.1 0.0%

Notes: Historical revenue data is the total of state and local revenue for each year as reported by the U.S. Census Bureau, State and Local Government Finance, available here. The Census Bureau does not provide revenue data for the 1999-00 and 2001-02 fiscal years. The average of the preceding and subsequent fiscal years are used for the calculation. Also note that the recurring amount for the 2006 legislative year is excluded as the calculations below do not extend beyond the 2007-08 fiscal year, and thus the recurring estimate is unnecessary.

To estimate the revenue impact of legislative actions in years, it is assumed that the size of the recurring tax cut increases or decreases proportionally with changes in total revenue. For example, in the 2001 legislative session, the estimated size of the recurring changes was -.1% in the 2002-03 fiscal year. In the 2003-04 fiscal year and in subsequent years, it is assumed that taxes were -.1% lower due to the recurring changes made in the 2001 legislative session. Table 3 shows the annual effect (in nominal dollars) of both cash tax changes and the expected recurring changes. The recurring estimates are in bold.

Table 3. Nominal Revenue Changes from Cash and Recurring Estimates (Millions) Legisl Fiscal Year Total

ative Year

Revenue Change From Specific Legislative Session

1999-00

2000-00

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

1999 -802 -685 -685

-816

-947

-971

-995

-1124

-1270

-8295

2000   -450 -458 -539

-626

-641

-657

-742

-839

-4951

2001     -95 -89 -161

-165

-169

-191

-216

-1085

2002       -215 -126 15 15 17 19 -2752003         176 96 123 139 158 6932004           -92 158 189 214 4692005             -103 -72 -75 -2502006               -272 -282 -554Total -802 -

1134

-1238

-1659

-1683

-1758

-1627

-2056

-2291

-14248

In addition to specific legislative actions, Florida taxpayers also benefited from the phasing out of the state’s estate tax, which Gov. Bush supported.

Table 4 provides estimates the reduction in tax liability from the phase-out. Revenue projections without the phase-out are not available. For the purposes this analysis, it is assumed the estate tax revenue would increase at 3.2% per year. This figure is equal to the average annual growth rate of the estate tax revenue from the 1998-09 fiscal year to the 2001-02 fiscal year.2 This likely understates the actually growth in the estate tax in later years as the 2001-02 fiscal year occurred during a recession.

Table 4. Estate Tax Projected Revenue Changes from Phase-Out  2002-

032003-04

2004-05

2005-06

2006-07

2007-08

Estate Tax -200 -397 -467 -727 -778 -848

Table 5 totals the revenue changes that occurred during Governor Bush’s tenure. Thus far all figures have been presented in nominal dollars. Table 5 2 Revenue estimates are derived from the June Monthly Economic reports, available here.

adjusted these estimates for inflation. In total, the tax reductions discussed above reduced Floridian taxpayers tax burdens by $19.3 billion (2007 dollars) from 1999 to 2007.

Table 5. Total Value of Revenue Changes Made From 1999 to 2007 (Millions)  199

9-002000-00

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Total

Nominal Dollars -802

-1,134

-1,238

-1,858

-2,081

-2,225

-2,354

-2,834

-3,139

-17,665

Real 2007 Dollars -998

-1,366

-1,450

-2,142

-2,344

-2,442

-2,500

-2,915

-3,139

-19,297

Notes: Inflation adjustment uses CPI-U. Available here.

Data Limitations and CaveatsThe above analysis does not extend beyond the 2007-08 fiscal year. This likely understates the true value of the tax reductions since it omits the tax savings from later years that were a consequence of reforms occurring during Governor Bush’s administration.

No attempt has been made to disaggregate tax changes from more revenue changes unrelated to taxes. These include revenue increases from the state lottery, tuition increases in state universities, and changes in state employee health premiums.