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."
Sources: Rick Scott's Plan to Turn Florida Around: 7 Steps. 700,000 New Jobs. 7 Years.
Subjects: Corporations, Taxes
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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.
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
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Scott proposes reducing corporate tax rate
Updated: Monday, February 7th, 2011
By Amy Sherman
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.
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