LEGISLATIVE SPECIAL
EDITION
Sixty Days of Lawmaking
As is the case with most
legislative sessions, Associated Industries of Florida (AIF) will spend the months of
March and April and the first week of May trying to get laws passed that didn’t get
enacted last year, and trying to kill bills restored to life from last year’s
legislative graveyard.
With Republican control of the Legislature and governor’s mansion,
some might be tempted to consider passage of pro-business bills a done deal. There are no
guarantees in lawmaking, however, and this session will demand just as much perseverance
and vigilance as any other.
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Cover Story
by jacquelyn horkan, editor
Sixty
Days Of Lawmaking
As is the case with most legislative sessions, Associated Industries of Florida (AIF)
will spend the months of March and April and the first week of May trying to get laws
passed that didn’t get enacted last year, and trying to kill bills restored to life
from last year’s legislative graveyard.
With Republican control of the Legislature and governor’s mansion, some might be
tempted to consider passage of pro-business bills a done deal. There are no guarantees in
lawmaking, however, and this session will demand just as much perseverance and vigilance
as any other.
Tort Reform
In 1998 the Legislature enacted a comprehensive package of reforms to the state civil
justice system that was vetoed by the late Gov. Lawton Chiles. This year the House and
Senate leadership, along with Gov. Jeb Bush, have endorsed passage of a significant tort
reform bill.
The 1999 House and Senate bills remain essentially the same as the version vetoed last
year by Gov. Chiles, with two exceptions. First, the safe harbor list in the premises
liability section has been deleted because it placed complex, ambiguous, and impractical
requirements
on businesses.
The second exception involves joint and several liability. Last year’s bill
contained a key compromise on joint and several liability that established a 20-percent
threshold and $300,000 cap. In other words, joint and several would only apply to those
defendants 21 percent or more at fault; their joint and several liability for economic
damages would be capped at $300,000. For any damages over $300,000, each defendant would
pay only the portion of damages attributed to his percentage of fault. The business
community had sought a total repeal of joint and several, but accepted the partial
limitation for the purpose of getting the measure passed.
This year the House version of tort reform lowers the joint and several cap to $200,000
and removes the percentage threshold. The Senate version of the bill includes a $250,000
cap and a 33-percent threshold.
Other provisions of the 1999 bill include the following:
- a series of jury reform measures to inform and instruct jurors and allow greater
participation by jurors in civil trials
- greater sanctions to deter frivolous litigation and tactics designed to delay the
process
- a safe harbor for employers when they hire new employees
- definition of trespassers and the duty owed to them by the owners of property
- a change in premises liability that makes the owner liable only for his contribution to
an injury that occurs on his property; the owner of the premises is not liable for the
portion of damages that is attributed to the criminal or other person who injured the
plaintiff on the owner’s premises.
- punitive damage reforms including: raising the burden of proof for entitlement to
punitive damages to "clear and convincing" evidence; repealing vicarious
liability for punitive damages; caps on punitive damages when they are imposed because of
gross negligence; clear definitions of conduct necessary to impose punitive damages; and a
one-time award of punitive damages for the same action.
- cap of $800,000 on vicarious liability damages for owners of vehicles
- government rules defense that is a rebuttable presumption; allows a jury to consider a
manufacturer’s adherence to government rules if a three-part test is met
- a statute of repose that does not allow a product liability action if a specified amount
of time (probably between 12 and 18 years) has passed since the delivery of the completed
product to its original purchaser
Taxes
Four years ago AIF introduced its 1995 Jobs Act, a package of industrial tax cuts based
on an exhaustive study of impediments to the state’s economic development efforts.
The study found that Florida’s crazy-quilt system of taxation made the state
non-competitive in the contest to lure new industries. Taxes on industry also kept
homegrown manufacturers from expanding within the state.
In 1995 the Jobs Act, while supported by lawmakers and the governor’s office, fell
victim to controversy surrounding the creation of Enterprise Florida, the public-private
partnership that was to assume control over economic development.
Over the last three sessions the Jobs Package has been enacted in a piecemeal fashion,
beginning with the 1996 passage of the exemption on energy used in manufacturing. Last
year more provisions gained approval, most significantly sales tax exemptions on the
purchase of pollution control equipment and tax exemptions designed to spur an increase in
corporate-sponsored research at state universities.
This year AIF will seek implementation of the remaining provisions of the Jobs Act,
along with the reduction or abolition of other anti-prosperity taxes.
Intangibles Tax
Last year the Legislature enacted an AIF-backed phase-out of the intangibles tax on
accounts receivable. In 1998 the Legislature exempted one-third of total accounts
receivable from the annual tax, with the remaining two-thirds to be phased out over the
next two years. Gov. Bush, however, is proposing an acceleration of the phase-out, making
accounts receivable 100 percent exempt from the intangibles tax this year. The savings to
business from this exemption is an estimated $80.2 million per year.
Gov. Bush is also recommending an increase in intangibles tax exemptions for individual
filers, joint filers, and businesses, of $100,000, $200,000, and $100,000 respectively.
The larger exemption amount will free smaller business and those of more modest means from
the burden of complying with the paperwork demanded by this complex and confusing tax.
The total savings for the accounts receivable phase-out and the increased property
exemptions is estimated at $283 million per year.
Repeal Of Sales Tax Speedup
In the early 1980s the state devised a method to increase tax revenues without
increasing taxes.
All registered sales tax dealers (businesses that collect sales taxes from consumers
and forward them to the state) were required to advance 66 2/3 percent of their average
monthly sales tax collections (and actual collections for the last ten days of the
previous month) by the 20th day of the current month.
The speedup of sales tax remissions amounted to an interest-free loan by businesses to
the state of Florida. Since the advance was based on average monthly collections, in
months when sales were slow, businesses were advancing more in sales tax than they had
collected. Many businesses had to borrow money in order to meet their obligation to
advance money to the state.
The speedup, scheduled to be phased out, was extended in 1990 when, once again, the
state found itself short on cash.
Total repeal of the speedup is unlikely because it would cost the state $600 million a
year in lost revenue. AIF is working with legislative leaders and staff, however, to make
the advanced payment of sales tax less onerous. AIF is recommending an increase in the
threshold by which businesses become subject to the speedup from $100,000 in annual sales
tax collections to $200,000 and moving the deadline for payment of the advance from the
20th day of each month to the 28th.
Taxpayer Bill Of Rights
Florida currently makes taxpayers subject to audits for a longer period of time than
almost every other state. AIF is recommending a reduction from five years to three years
in that statute of limitations on taxpayer audits.
Florida law also imposes 12-percent interest on delinquent tax payments. AIF is
recommending legislation to adjust the penalty rate to prime plus one. That way the rate
would float with the market and would not require the state to charge either an excessive
rate or one that is lower than the going market rate.
Gov. Bush has endorsed both ideas and proposed that the state pay interest on
overpayment of taxes when repayment by the state takes longer than 90 days.
Sales Tax Rollback On Commercial Telephone And Commercial Electricity
The sales tax rate for all taxable items and services is 6 percent, with the exception
of commercial telephone and commercial electricity charges, which are taxed at 7 percent.
AIF is recommending a rollback on this rate to 6 percent.
The higher rate was implemented in 1992 when the Legislature faced revenue shortfalls.
Rather than raising taxes on individual taxpayers, lawmakers enacted several business-only
revenue-creating mechanisms. At the time business people were promised that the increases
would be short-lived and would be repealed when the state’s economic condition
improved. That time is now.
Sales Tax Exemption On Repair Parts And Labor
Attracting more manufacturers to Florida requires the removal of embedded taxes that
increase the cost of goods manufactured in this state.
One such cost is the sales tax on parts and labor used in the repair of manufacturing
machinery and equipment. This is yet another case of the politicians funding the growth of
government by levying special taxes on manufacturers to avoid taxing individual citizens.
As a result, high-paying manufacturing jobs are scarce.
Alcoholic Beverage Surcharge Repeal
In 1990, hungry for money, the Florida Legislature enacted a surcharge on alcohol
served by the drink, an action taken with little discussion or deliberation. Billed as a
tax on sin, the surcharge allowed lawmakers to increase taxes without raising the ire of
taxpayers.
Restaurants, bars, and all other establishments licensed to serve alcohol by the drink
collect this tax from their patrons. The surcharge is imposed at the rate of 10 cents per
ounce of liquor or four ounces of wine, and four cents on 12 ounces of beer. The tax does
not apply to package sales, only to alcoholic beverages sold at retail for consumption on
the vendor’s premises.
Since its passage, the surcharge has proven cumbersome in compliance and
administration, raising more than its share of agitation from audit assessments.
The alcoholic beverage surcharge is a prime example of a tax enacted for all the wrong
reasons and it should be repealed.
Health Care
Mandated Coverage Imposing additional mandates in health insurance policies causes cost
increases that can force some insurers out of the market and price health insurance out of
the reach of many small businesses. Mandating coverage of certain treatments or certain
practitioners forces people to pay for frills they may not want and cannot afford.
Still, each year new mandates are proposed and often enacted. They are now beginning to
catch up with us. Heath insurance costs are rising across the board. Increased premiums
result in more people dropping coverage. AIF opposes any health insurance mandate that
makes coverage less affordable and accessible without greatly contributing to the
increased well-being of all Floridians.
Mental Health Parity
For the last three years, members of the mental health professions have tried to
convince the Legislature to enact so-called "mental health parity" legislation
that would require all health insurance policies to cover mental health treatment at the
same levels as physical treatment.
In 1998, a federal mental health parity mandate was enacted that capped resulting
premium increases at 1 percent.
AIF opposes mental health parity legislation on the same grounds that it opposes other
mandates: they force people to pay for services they do not want or need. Proponents of
mental health parity legislation argue that taxpayers would save money if mental health
treatment were covered by private insurance because it would help the mentally ill become
more productive. The argument is flawed on several levels.
First, if mental health parity were enacted and those costs were transferred to the
private sector, government would not reduce taxes. Instead taxpayers would be forced to
pay twice: first in taxes and second in increased costs of products because companies
would simply pass along their costs. For some employers the increase in premiums would
force them simply to cancel their insurance policies, leaving their employees to rely on
taxpayer-funded health care.
Second, most people with health insurance are covered by their employers. Many of the
mentally ill are not employed or dependents of someone covered by an employer’s
health insurance policy. They either go untreated or they receive care in
government-funded facilities.
Finally, if government chooses to provide services to one segment of the population,
the cost for providing those services should be paid by taxpayers, not those in the
private sector.
If Florida must enact mental health parity legislation, however, it should contain a
1-percent cap, similar to the one in the federal law, to avoid putting Florida companies
at a competitive disadvantage.
HMO Civil Remedy
In 1996 the Academy of Florida Trial Lawyers successfully convinced the Legislature to
enact a bill that created a new right for patients to sue their health maintenance
organizations (HMO). The law would have allowed HMO subscribers to file a lawsuit if the
HMO denied medical treatment or service.
Gov. Chiles, an ardent proponent of HMOs, vetoed the legislation on the grounds that it
would "eviscerate the concept of utilization review and cost control that are the
heart of managed care."
Proponents of the HMO civil remedy legislation claimed that it would simply parallel
existing laws that allow bad-faith actions against fee-for-service insurers. They alleged,
without evidence, that HMOs were withholding necessary treatments in the pursuit of
profits. In fact, the proposed legislation did not parallel existing law and it contained
little more than incentives for people to hire lawyers any time they experienced
displeasure with their HMOs.
AIF believes that when it comes to health care, disputes must be settled quickly as
well as fairly in the interests of the health of the patient. Courtroom settlements to
disputes are notoriously slow. If the need exists for improved dispute resolution
procedures, better methods exist than lawsuits.
HMO civil remedy legislation may come up during the 1999 session. Many conservative
lawmakers, who would normally oppose trial lawyer bills, support the proposal because they
are leery of HMOs. It is true that HMOs are neither free market nor socialized; rather
they are an unlovely hybrid in which command and control is exercised by players in the
free market rather than in government.
To make health care affordable, some mechanism must be in place to control costs. As
long as the con-sumers of health care are not the payers, that control will be exercised
by a third party. Private insurance carriers, who are under the discipline of the free
market, are better candidates for control than are government bureaucrats.
HMO civil remedy legislation will render impotent the cost-control strategies
implemented by HMOs while doing nothing to improve the care and health of subscribers. For
that reason AIF will continue to oppose this legislation.
Environment
AIF is anticipating action on an environmental self-audit privilege bill. This measure
would allow businesses to conduct reviews of their pollution-control efforts without
facing the threat of lawsuits and government punishment for any problems they uncover and
correct (see In an Imperfect World, Nov.-Dec. 1998 Florida Business Insight).
March/April 1999 -- Florida Business Insight, PO Box 784, Tallahassee, Fla.
32302
(850)224-7173, insight@aif.com
