Friday, October 31st, 2014

Scott-O-Meter

Eliminate Florida's corporate income tax over 7 years


"Eliminate Florida's corporate income tax over seven years. Fully phasing out the corporate income tax over time will have a large positive benefit for Florida's economy while having a minimal impact on state revenues. Total state tax revenues will benefit from the dynamic economic growth created by the corporate income-tax phaseout."


Updates

Legislature balks at exemption increase for second straight year

Gov. Rick Scott's crusade to wipe out Florida's corporate income tax marches on, but for the second year in a row, the Legislature ground the procession to a halt.

When Scott came into office, he was intent on ending the 5.5 percent tax on corporations by 2018, asking the lawmakers in his first year to slash the tax to 3 percent and gradually phasing it out. Since legislators weren't receptive to that plan, Scott began to ask for gradually higher tax exemptions on corporate incomes.

It was something of a back-door method of cutting businesses a break. In 2011 Scott got the Legislature to increase the exemption from $5,000 to $25,000. The next year, they took it up to $50,000. That resulted in more than 12,000 Florida businesses being exempt from paying corporate income tax at all, costing the state some $2 billion in revenue.

In 2013 Scott tried to bump up the exemption to $75,000, in an attempt to exempt 2,000 more businesses from the corporate income tax. The Legislature wasn't biting, with officials balking at the lost tax revenue, estimated at up to $20 million.

In 2014, Scott tried again, proposing to increase the exemption to $75,000. That proposal, SB 134, made it out of the Appropriations Subcommittee on Finance and Tax before dying in Appropriations on May 2.

The Legislature did pass several other, smaller-scale tax cuts and credits this year, including breaks for the telecommunications industry, research and development expenses, commercial electricity rates, unemployment compensation and equipment manufacturing. Scott touted these and other breaks among 40 claimed tax cuts enacted during his administration.

On eliminating the corporate income tax, Scott spokesman John Tupps said the governor "will continue to work towards this goal."

For the second year in a row, Scott suggested pushing the corporate income tax exemption to $75,000. For the second year in a row, the Legislature did not make the exemption law. We rate this promise Stalled.

Sources:

Palm Beach Post, "Scott's latest proposed tax break draws praise from manufacturers," Jan. 9, 2013

First Coast News, "Governor Rick Scott proposes his budget," Jan. 29, 2014

Political Fix Florida blog, "Corporate income tax exemption increase clears Senate panel," April 2, 2014

Tampa Bay Times, "Florida Legislature 2014: What passed and what failed," May 3, 2014

Palm Beach Post, "Scott signs package of tax cuts, rounding out election-year, $500M-plus giveback," May 12, 2014

PolitiFact Florida, "Gov. Scott claims he 'cut taxes 40 times for Florida families'," May 21, 2014

Florida Senate, SB 134, accessed July 10, 2014

Florida Department of Revenue, 2014 Tax Handbook, July 14, 2014

Interview with John Tupps, Rick Scott spokesman, June 27, 2014

Scott fails to get Legislature on board with exempting more businesses from corporate income tax

Gov. Rick Scott's effort to steadily eliminate the state's corporate income tax took a hit during the 2013 legislative session.

The proposal, SB 562 and HB 401, failed to get any traction among lawmakers in 2013. Scott, meanwhile, did not do much to push what was once a campaign priority and included in his budget recommendations. His press office declined to elaborate when we asked why.

"The Legislature failed to act on this recommendation,” said spokesman John Tupps.

The measure, which received just one committee vote between the two chambers, would have increased the exemption for the corporate income tax from $50,000 to $75,000. Expanding the exemption would have spared 2,000 more businesses from paying the tax, Scott has said.

The history: As a Capitol n00b, Scott called on legislators to slice the corporate income tax rate from 5.5 percent to 3 percent, with the rest of it being phased out through 2018. That did not work out.

So Scott settled on a roundabout way of doing it: relieving businesses of paying the tax by upping the amount of income exempt from the tax.

In his first year, Scott lobbied to exempt the first $25,000 worth of taxable income, up from $5,000. In 2012, he got the Legislature to raise the exemption to $50,000. In all, the changes spared more than 12,000 Florida businesses from paying the corporate income tax.

The tax comprises about 9 percent, or $2 billion, of the state's general revenue, according to the Department of Revenue.

Scott told the state real estate agents group that raising the exemption to $75,000 would benefit about 2,000 businesses, according to the Tampa Bay Times/Miami Herald. Scott's press team has said the new exemption would mean 80 percent of Florida businesses would be exempt from paying the tax.

The lawmakers who sponsored the proposal said there was support for it in the Legislature, but it didn't hold up to other pro-business priorities. Rep. Ross Spano, R-Dover, said there was not enough room for the measure in the budget "because it came with an approximate $20 million fiscal impact."

In the Senate, leaders were supportive but felt like they were just looking to spread their wings, said Sen. Dorothy Hukill, R-Port Orange.

"Some people that I spoke to felt like we had been in this arena before,” Hukill said.

But the Legislature was still business-friendly, she said, pointing to the compromise between Scott and lawmakers granting a three-year exemption on sales taxes on manufacturing equipment.

To a Democrat, the Legislature's slow-down on corporate income taxes and consideration of ending a 26-year insurance industry tax break was welcome.

"It gives me hope that there's a little bit of a shift in philosophy,” said Sen. Jeff Clemens, D-Lake Worth, the only member who voted against Hukill's bill. "It seems like for the last several years we"ve continued to give corporate tax breaks while the average working person got nothing.”

So where does this leave Scott's promise to eliminate the corporate income tax? After two years of exempting businesses from the tax, the Legislature halted Scott's progress by refusing to consider legislation that would have relieved more businesses.

We rate this pledge Stalled.

Sources:

The Florida Current, "Lawmakers grow skeptical of tax breaks, incentives,” April 22, 2013

Florida Department of Revenue, 2013 Tax Handbook, May 9, 2013

Interview with Sen. Jeff Clemens, May 10, 2013

Interview with Sen. Dorothy Hukill, May 10, 2013

Email interview with Rep. Ross Spano, May 10, 2013

Interview with John Tupps, Gov. Rick Scott spokesman, May 10, 2013

Scott wants to exempt more businesses from corporate tax

Gov. Rick Scott will use the 2013 legislative session to continue his back-door strategy of eliminating the state's corporate income tax.

The Legislature had no appetite for his first idea: cutting the corporate income tax rate from 5.5 percent to 3 percent. So Scott instead settled on an approach that seeks to exempt more business income from being subject to the tax.

In 2011, he successfully lobbied for the exemption of the first $5,000 worth of taxable income to $25,000. In 2012, the Legislature passed an exemption of $25,000 to $50,000.

You can guess what's coming next: Scott wants to widen the exemption from $50,000 to $75,000 during the 2013 legislative session, which starts in March.

"Today, I am proud to announce that in the upcoming legislative session, we will work to further eliminate the business tax for another 2,000 small businesses," Scott told the Florida Association of Realtors in November. "Everything we do must be tied to helping families get jobs, and eliminating this tax will ensure more small businesses can hire people."

The corporate income tax comprises about 8 percent -- or $2 billion -- of the state's general revenue, according to the Department of Revenue.

Scott told the real estate agents group that the cut, which would benefit about 2,000 businesses, would cost about $8 million annually, according to the Tampa Bay Times/Miami Herald. Scott's press team said the new exemption would mean 80 percent of Florida businesses would be exempt from paying the tax.

Scott wanted to give small businesses another tax break, but Florida voters declined to give it to them. Voters rejected Amendment 10, which would have given small businesses with less than $50,000 worth of furniture and other equipment an additional $25,000 tax exemption. The cut would have had resulted in about $20 million in savings for small businesses.

Florida Democratic Party executive director Scott Arceneaux scoffed at Scott's new request to make more businesses exempt from paying the corporate income tax, saying Scott wants to give "handouts to the corporate special interests who epitomize the broken politics of Tallahassee.”

We will monitor Scott's promise to eliminate the corporate income tax during the 2013 legislative session and beyond. For now it remains In The Works.

Sources:

The Miami Herald/Tampa Bay Times, "Gov. Rick Scott proposes more business tax cuts for 2013,” Nov. 8, 2012

Florida Department of Revenue, Florida Tax Handbook 2012

The Miami Herald/Tampa Bay Times, "Business tax cut amendment  draws little attention,” Oct. 24, 2012

Phase Out Florida's Corporate Income Tax, Gov. Rick Scott's budget website, accessed March 19, 2012

The Tax Foundation's State Business Climate Tax Index Rankings, 2011-12

Corporate Income Taxpayers by size, Gov. Scott's budget website, accessed March 19, 2012

Interview with Jackie Schutz, Scott spokeswoman, Nov. 26, 2012

Interview with David Bergstein, Florida Democratic Party deputy communications director, Nov. 26, 2012

Gov. Rick Scott's website, "Gov. Scott announces further elimination of business tax,” Nov. 8, 2012

Under Scott, fewer businesses pay corporate income taxes

Gov. Rick Scott continued chipping away at Florida's corporate income tax in his second go-around with the Legislature.

 

Unlike last year, when he unsuccessfully lobbied lawmakers for a 3 percent reduction of the 5.5 percent overall rate, Scott left the rate alone and instead worked on removing more businesses from the tax roll.

 

In 2011, lawmakers granted him an exemption for businesses owing up to $25,000 in corporate income taxes -- up from $5,000. This spared 8,351 businesses from paying that tax, according to the Office of Economic and Demographic Research.

 

Scott kept going with that in his 2012 tax strategy. The Legislature agreed to double the corporate income tax exemption to $50,000, sparing 3,894 of the businesses left on the tax roll. The approximate cost to the state: $30 million.

 

This measure and other breaks amounted to a $150 million tax relief package from Scott.

 

Another of Scott's targets was the tangible personal property tax. Scott asked lawmakers to eliminate this tax for businesses that own less than $50,000 in equipment and other property.

 

The Legislature approved this as a constitutional amendment for the 2012 ballot, so voters will get the final say.

 

Scott says it will exempt half, or about 150,000, of the businesses that usually pay this tax, and the loss to the state is about $20 million in 2013.

 

Other breaks Scott sought and got: a $54.4 million break for manufacturing equipment and a $12.3 million break for private planes.

 

Scott has said jobs will "grow like crazy” as a result of tax cuts that make Florida more business friendly.

 

But one of Scott's top advisers acknowledged immediate job growth isn't likely as a result of tax breaks here and there.

 

"Quite frankly, depending on the size and scope of the company, their savings and tax breaks might not be enough to bring a new person on," legislative affairs director Jon Costello said in a fall 2011 committee meeting. "But it might be enough to buy a new piece of equipment or do something that injects money back into the economy."

 

According to his budget website, Scott plans to ask the Legislature to exempt the remaining 10,000 businesses that owe corporate income taxes in "2013 and beyond.”

 

Scott's business-friendly tax breaks play well with conservatives but anger folks on the other side of the political spectrum, like ThinkProgress.org and the left-leaning Florida Center for Economic and Fiscal Policy.

 

Scott's effort to reduce the corporate income tax is like former Gov. Jeb Bush's phasing out the intangibles tax, which cost the state $2 billion in lost revenues, said FCFEP executive director Karen Woodall.

 

"We're not going to have adequate sources of revenue to meet the needs of the state,” she said.

 

Scott has moved more than half of the businesses from the corporate income tax pay roll, and he doesn't plan to stop there. We're moving his promise from Stalled to In the Works.

 

Times/Herald staff writer Toluse Olorunnipa contributed to this report.

 

Sources:

Gov. Rick Scott tax priorities presentation, Feb. 27, 2012

 

"Gov. Scott lowers tax-cut goal, wins support,” Palm Beach Post, March 4, 2012

 

"Corporate income tax cut nears approval,” The Miami Herald, Feb. 14, 2012

 

"Lobbying pays off big for business,” The Miami Herald, March 11, 2012

 

Gov. Rick Scott's letter to President Obama

 

"Rick Scott to continue corporate income tax cut push,” News Service of Florida via PolitiJax, Oct. 11, 2011

 

"Scott's 'job-creating' tax cuts total just $8.4 million next year,” Orlando Sentinel, Oct. 19, 2011

 

"Florida Doles Out Billions In Corporate Tax Breaks While Slashing College Funding And Laying Off Thousands,” ThinkProgress.org, March 13, 2012

 

"Legislators hit hardest the pocketbooks of state workers, college students,” The Miami Herald, March 10, 2012

 

Phase Out Florida's Corporate Income Tax, Gov. Rick Scott"s budget website, accessed March 19, 2012

 

The Tax Foundation's State Business Climate Tax Index Rankings, 2011-12

 

HB 7087 committee analysis

 

Corporate Income Taxpayers by size, Gov. Scott's budget website, accessed March 19, 2012

 

Interview with Karen Woodall, Florida Center Fiscal and Economic Policy executive director, March 20, 2012

 

Revenue Estimating Conference impact report, Office of Economic and Demographic Research, accessed March 21, 2012

No legislative will to make Scott's big corporate tax cuts

Gov. Rick Scott presented a 2011-12 budget to lawmakers on Feb. 7, 2011, that cut the corporate income tax rate from 5.5 to 3 percent, the first step in his plan to phase out the business tax entirely over seven years.

But when the Legislature finally passed its budget on May 7, it was unwilling to make the deep cuts needed elsewhere in the budget to cover the $459 million in corporate tax relief. The final budget that Scott will sign or veto includes no corporate tax rate reduction.

Instead, it includes only a $30 million reduction, created not by rate cuts but by expanding the current exemption for the corporate tax. The budget expands the current exemption for businesses from $5,000 in taxes they owe to $25,000. House Speaker Dean Cannon says the expansion of the exemption reduces the 30,000 businesses that pay the tax by about half.

The change represents less than 1/10th of the cut Scott had sought.

Cannon and Senate President Mike Haridopolos maintained from the start of the session that it would be difficult to find the cost savings needed to cut the corporate income tax rate.

"As I've talked to so many members and, more importantly, business leaders across the state, they feel that stability is more important than reducing a 5.5 percent corporate tax rate," Haridopolos said on May 1. "My stance has been and will continue to be that the most important thing is to show budget discipline by spending less."

The Legislature did include $210 million in property tax cuts in its budget by reducing the taxing authority of local water management districts.

"By eliminating the corporate income tax for nearly half of the Florida businesses who pay it, we are working with our partners in the Senate and Gov. Scott to make our common goal of private-sector job creation a reality," Cannon said in a statement on May 5. "I share Gov. Scott's desire to reduce and hopefully eliminate the corporate income tax. As we work to attract new businesses to locate and encourage existing businesses to expand in our state, today's legislation is a great first step and a sure signal that Florida is open for business."

But on eliminating corporate taxes, Scott will have to wait until next year to try again. We rate this promise Stalled.

Sources:

St. Petersburg Times, "Haridopolos: Scott's corporate tax cut dead in Senate," May 1, 2011

Palm Beach Post, "Scott satisfied with Florida budget compromise giving him a sixth of tax cuts he wanted," May 3, 2011

Rick Scott, "Eliminate Florida's Corporate Income Tax Over Seven Years," accessed May 6, 2011

Dean Cannon press release, May 5, 2011

Scott proposes reducing corporate tax rate

Gov. Rick Scott tackled one of his key campaign promises in his first budget proposal released Feb. 7, 2011: Eliminate the corporate income tax.

He didn't propose full immediate elimination – in his 7-7-7 plan to create 700,000 new jobs, he gave himself seven years to do that – but he proposed making a dent.

From his Feb. 7 speech in Eustis announcing his budget: 

"This 'jobs budget' will reduce the business tax from 5.5 percent to 3 percent, completely phasing it out by 2018. And we will cut property taxes by $1.4 billion over the two-year term. Together we will cut taxes by over $4 billion over two years. Critics have said we can't afford to cut taxes now. They repeat the same misguided claims we hear in Washington. I say they are wrong. I say we must cut taxes now.

"Things cannot improve until we have more private sector jobs. We will capture more jobs if other states have a business tax that Florida does not have. We are competing with 49 other states and many countries for entrepreneurs who start, grow and move companies based on where they can get the best return. Cutting taxes is essential to economic prosperity. We will be the best place in the world to live, work and play."

Scott posted his new budget on the website www.letsgettowork.net, which has a page on reducing the corporate income tax rate. That page shows that in 2011-12, he wants to reduce the rate from 5.5 percent to 3 percent, then 2.5 percent in 2012-13 and 2 percent in 2013-14 -- the last year listed in the chart.

Florida's corporate income tax is already low. According to the 2010 Florida Tax Handbook, all the states and the District of Columbia impose some form of corporate income or franchise tax, except for Nevada, South Dakota, Washington (state) and Wyoming. Most are flat rates, ranging from 4.63 percent to 9.99 percent. Sixteen states use graduated rates, between 1.0 and 9.99 percent. Iowa goes up to a 12 percent maximum rate.

You can see how Florida compares in this chart from the Tax Foundation, which calls itself a nonpartisan educational organization. The Federation of Tax Administrators, which serves the states' tax collection agencies, has its own chart.

According to the website of the Florida Department of Revenue and the state's chief economist Amy Baker, most corporations or entities that earn income in the state have to file, even if no tax is due. Even out-of-state firms must file for the portion of their revenue earned here.

Renee Watters, spokesperson for the revenue department, sent us a link to the 2010 Florida Tax Handbook from the state's Office of Economic and Demographic Research based on the December 2009 revenue estimating conference. The handbook shows that since 2004-05, the net collections (minus refunds) have ranged from about $1.4 billion to $2.2 billion. For 2010-11, the most recent (December 2010) estimated collection is almost $2 billion -- or about 9 percent of the state's general fund. The corporate tax goes into the state's general fund that pays for a variety of programs including education and human services.

Scott promised to phase out the corporate tax rate over seven years. His first annual budget proposal reduces the corporate tax rate from 5.5 percent to 3 percent for 2011-12 and ultimately down to 2 percent by 2013-14. The state Legislature will likely wrestle with such a tax cut amid a budget shortfall already projected to be more than $3 billion. But for now, we rate this promise In the Works.

Sources:

Florida Department of Revenue website,  "Florida's Corporate Income Tax," Accessed Feb. 7, 2011

Florida Department of Economic and Demographic Research, Florida Tax Handbook, 2010

Gov. Rick Scott's website, www.letsgettowork.net, Feb. 7. 2011

CapitalSoup.com, "Gov. Scott unveils Florida's first 'jobs budget' before a capacity crowd in Eustis,"Feb. 7, 2011

Tax Foundation, "National and state corporate income tax rates, U.S. states and OECD Countries, 2011," Accessed Feb. 7, 2011

Federation of Tax Administrators, "Range of state corporate income tax rates," Tax year 2010

Rick Scott for Governor campaign website, "Eliminate Florida's business income tax over 7 years,"Accessed Feb. 7, 2011 

St. Petersburg Times"Gov. Rick Scott touts tax plan as a model for President Barack Obama," Feb. 4, 2011

Fort Myers News-Press"Tea Party activists gather for Scott's budget announcement," Feb. 6, 2011

Miami Herald/St. Petersburg Times, "Scott's promise to cut taxes to face test," Jan. 20, 2011

Interview, Florida Department of Revenue spokeswoman Renee Watters, Feb. 7, 2011 

Interview, Florida's chief economist Amy Baker, Feb. 7, 2011