Scott has made progress on eliminating state corporate tax
Published: Sunday, August 4, 2013 at 5:24 p.m.
Last Modified: Sunday, August 4, 2013 at 5:24 p.m.
TALLAHASSEE — Gov. Rick Scott offered mild praise this week for President Barack Obama’s plan to cut the federal corporate income tax, indicating that Obama seemed to be following Florida’s lead in reducing business taxes.
Scott said he “welcomed” Obama’s proposal to cut the federal corporate tax rate from 35 percent to 28 percent, while cutting the rate for manufacturers to 25 percent.
“In Florida, we have eliminated business taxes for 70 percent of businesses, and we recently eliminated sales taxes on manufacturing equipment,” Scott said.
The statements are true. But Scott offered a much bolder plan when he was running for election in 2010, promising to eliminate Florida’s 5.5 percent corporate income tax over seven years, while creating 700,000 jobs.
Heading toward the final year of his term, Scott has made only modest progress in eliminating the state corporate tax. The rate remains at 5.5 percent, although Scott has successfully pushed for an increase in the income exemption.
When he took office in 2011, the exemption applied to businesses that had a net income of $5,000 or less. Scott has managed to push it to $50,000, allowing him to assert that 70 percent of Florida businesses don’t pay the tax since the bulk of the tax is paid by major corporations.
In his first proposed state budget, Scott aggressively called for cutting the corporate tax rate by 2.5 percent — but the plan was rejected by lawmakers because it would have eliminated $460 million in state revenue at a time when the state was short of cash to pay for schools, transportation and health care programs.
To balance his budget plan, which had major tax cuts, Scott had to cut state spending, including a 10 percent reduction in education funding.
State Rep. Mark Pafford, D-West Palm Beach, a member of the House Appropriations Committee, said Scott’s initial plan to slash the state corporate tax rate faced “pushback” from lawmakers because of the impact on state funding.
“It was another one of those examples where he intended to do something and the reality of the Florida budget hit him and he’s not been able to address that,” Pafford said.
And that will remain Scott’s challenge if he wants to eliminate the corporate income tax.
Enacted under Gov. Reubin Askew in 1971, the tax is now the second-largest revenue source in the state budget. It is expected to generate about $2.2 billion this year, trailing only the 6 percent state sales tax, which brings in about $19 billion annually.
In contrast, the $50,000 income exemption only represents a $58 million revenue decline, according to state analysts.
Pafford, who also opposed Scott’s plan this year to eliminate the sales tax on equipment purchases by manufacturers, said Florida already has low business taxes, and the tax cuts have to be balanced against funding needs for schools, roads and other programs that enhance Florida’s ability to improve its economy.
An annual survey by the non-partisan Tax Foundation in Washington, D.C., ranked Florida’s overall business tax climate as fifth-best in the country. Florida ranked high in the 2012 survey, in part, because it does not have a personal income tax, while its corporate tax rated 13th in the group’s evaluation.
However, Florida’s overall ranking did trail the handful of states that have no corporate income tax, including Nevada, South Dakota, Washington and Wyoming.
Republican lawmakers, who control the House and Senate, are receptive to Scott’s continued push to lower taxes, including the corporate income tax.
“I think we’ve been taking bite-sized chunks out of it,” said House Finance and Tax Chairman Ritch Workman, R-Melbourne.
Workman said as Florida’s economy continues to rebound and bring additional funding to the state, lawmakers will have a choice of either finding new ways to spend it or finding ways to use the increased revenue to offset taxes.
As chairman of the finance and tax subcommittee, Workman said he would like to use the growing state revenues to eliminate taxes “that might get in the way of further (economic) growth.”
Workman said a further reduction in the corporate tax would be part of that mix as well as other measures such as property tax relief, the reduction of state tax on cellphones and cable television and sales tax relief, such as the tax businesses have to pay on commercial leases.
“That is a big hit to our corporations,” Workman said.
Workman said the anticipated increase in state revenue in the next few years will give lawmakers an opportunity to eliminate taxes that might have outlived their original intent.
“This is the time to get rid of them,” he said.
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