Vote on Florida tax loophole was merely political theater

By Alex Leary, Times Staff Writer
In print: Friday, March 21, 2008

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TALLAHASSEE — Money is vanishing from state coffers by the billions, forcing lawmakers to eviscerate the budget.

So Rep. Dan Gelber proudly declared Thursday that he'd discovered a jackpot — a way to generate $365-million annually by closing a corporate tax loophole.

"Corporate tax loophole," he said, as if the words themselves were evil.

But the Miami Beach Democrat knew it was all for show. Republicans quickly assailed the proposal as a tax increase, not a revenue source in a dire time.

"Shall we bring out the grim reaper now?" Rep. Frank Attkisson, R-Kissimmee, joked before the 10-6 party-line vote.

The ideological theater did not completely overshadow a serious debate that has taken place nationwide. The issue involves companies such as Home Depot, Toys R Us and Staples that avoid some taxes by shifting income to subsidiaries in low-tax states as payment for leasing a logo or other intellectual property.

Gelber wants to do something called "combined reporting," which requires corporations to count all their profits — even those going to another state — when calculating Florida taxes. The state's corporate income tax rate is 5.5 percent.

More than 20 states, mostly in the western United States, have taken steps to close the loophole. Most Southern states have not, which, some argue, puts Florida at a disadvantage.

Gelber called for using $265-million to reduce school property taxes and $100-million to offset budget cuts to higher education. He then offered to devote the entire sum to cutting property taxes.

"You can either support huge corporate loopholes, or you can support property tax reduction," he goaded Republicans on the Government Efficiency and Accountability Council.

Business trade groups opposed the bill, saying it would deter corporations from setting up shop in Florida, hurting job growth. In the past decade, Florida actually has lost Fortune 500 companies despite the loophole, Gelber said.

"The losers are the consumers," said Rep. Rob Schenck, R-Spring Hill. "The $365-million will be made up elsewhere."

Critics noted that Florida tried something similar in the 1980s when, under Democratic Gov. Bob Graham, the state enacted a unitary tax on corporations only to reverse the decision.

"We've gone down this rotten road once before," said Randy Miller, executive vice president of the Florida Retail Federation.

Thursday's vote could play out in the November elections, with both sides painting each other in negative terms.