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Florida’s CEO-turned-governor has a big crush on businesses.
Republican Gov. Rick Scott loves them so much that the majority don’t have to bother paying business taxes, he told a conservative crowd at the Americans for Prosperity Foundation conference in Orlando.
Scott told the crowd that during his tenure the state has cut taxes five times (we noticed he pared down his claim quite a bit from earlier this summer when he said he cut taxes 24 times.)
"We cut property taxes for homeowners and businesses. We cut business taxes so today 70 percent of our businesses don't pay a business tax. And we got rid of a sales tax on machinery and equipment so we will have more manufacturing jobs."
Do nearly three-quarters of Florida businesses not pay a business tax?
Corporate income tax exemptions grew under Scott
PolitiFact Florida has been tracking Scott’s promise to eliminate the corporate income tax rate over seven years. The tax is paid as a percentage of the incomes of Florida businesses.
Scott initially wanted the Legislature to reduce the corporate tax rate, but that didn’t work out. So he took a different route: 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. Scott wanted to then raise the exemption to $75,000 but the Legislature didn’t go along with it in 2013.
We turned to Florida Department of Revenue data to show what percentage of businesses don’t pay corporate income taxes.
There were 49,562 corporations in total and 38,060 would have been exempt from the tax -- or about 76.8 percent in 2011. The tax exemption for those businesses adds up to $12.6 million.
That left 11,502 businesses that paid about $166 billion in corporate taxes.
These numbers represent the 2011 tax year, filed in 2012. The exemption has increased since then, so the number of exempt corporations may be slightly different.
We should note that many of these small businesses didn’t have to pay the corporate income tax before Scott’s tenure, too. Department of Revenue data shows of the 38,060 exempt businesses, about half earned less than $5,000 and therefore were exempt before Scott took office.
We interviewed two experts about Scott’s claim: Kurt Wenner of Florida TaxWatch and Sam Staley, managing director of Florida State University’s DeVoe L. Moore Center, which aims to increase public understanding about the role of government in a market economy.
Both Wenner and Staley pointed out that large businesses have always paid the lion’s share of the corporate taxes -- and continue to do so after Scott’s exemptions. (The large businesses get that exemption, too, but for them it means they don’t pay the tax on a small slice of their income.)
"Small businesses don’t contribute that much to overall revenue," Staley said. Therefore, the state is "not losing that much by exempting them."
However, even small businesses could be paying several other taxes or fees, such as property or sales taxes or in some cases, licensing fees.
To assess a state’s business climate, "you have to look at an entire portfolio of taxes and regulations," Staley said.
"Even if they don’t have to pay state corporate income tax, it might not be enough to compensate added costs of permitting at the local and county level," Staley said.
Wenner said that anytime the state can reduce taxes it will increase Florida’s attractiveness for businesses. However, "Florida’s corporate income taxes have never really been that high."
Scott said "70 percent of our businesses don't pay a business tax." His general point was that during his tenure, he’s been cutting all sorts of taxes.
State data for 2011 taxes shows that 76.8 percent of businesses don’t pay the corporate income tax due to the exemption. Scott is including some very small businesses here in his calculation and omitting that many of them were exempt from paying this tax before he took office.
We rate this claim Mostly True.
Americans for Prosperity Foundation Defending the Dream Summit, Gov. Rick Scott speech, Aug. 30, 2013
Florida Department of Revenue, Corporate income tax payers by size, 2011
PolitiFact’s Scott-O-Meter, "Eliminate Florida’s Corporate Income Tax over 7 years," Last update May 14, 2013
PolitiFact, "Alan Grayson returns to MSNBC stage, criticizes Gov. Rick Scott’s corporate income tax cut," March 8, 2011
Interview, Kurt Wenner, vice president of tax research at Florida TaxWatch, Sept. 6, 2013
Interview, Sam Staley, Managing Director, DeVoe L. Moore Center at Florida State University, Sept. 6, 2013
Interview, Tom Yu, spokesman for Gov. Rick Scott, Sept. 4, 2013
Interview, Renee Watters, spokeswoman for Florida Department of Revenue, Sept. 6, 2013
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