May 5, 2008

To: AAF Members
From: Clark Rector, Jr., Senior Vice President – Government Affairs
Re: Florida Taxation and Budget Reform Committee

The Florida Taxation and Budget Reform Commission has approved placing a $9 billion “tax swap” on the ballot in November. The measure could have severe consequences for advertising.

The proposed constitutional amendment would cut the property tax by an average of 25 percent—an estimated $9 billion of state revenue in 2011 if the plan goes into effect. The property tax is the main source of education funding in Florida and the amendment would require the legislature to maintain the same level of education funding. While it does not mandate where the new revenue would come from, it specifies that the legislature can raise the six percent sales tax by one percent and eliminate existing sales tax exemptions.

A one percent increase in the sales tax would raise approximately $4 billion, leaving the legislature $5 billion short of the amount needed to replace the lost property tax revenue. This means that the tax exemptions for many services—including advertising—would likely be at risk.

In order to be enacted, the amendment must be approved by 60 percent of Florida voters in November. The AAF, our Florida advertising federations and their lobbyist, Jack Hebert, are talking with other business groups to develop a strategy for addressing this issue and protecting advertising’s tax exemption.

I will keep you informed of further developments. As always, do not hesitate to contact me if you have any questions or comments.