TALLAHASSEE — Even as Florida faces economic uncertainty with the coronavirus epidemic, the Florida House on Thursday advanced a $193 million package of tax breaks and a plan to continue the refund of $543 million to the largest corporations in the state.
Opponents say the bill, HB 7097, will weaken the state’s ability to respond to crises, and address water quality and infrastructure needs.
Supporters say more tax cuts are needed to keep attracting newcomers to Florida, the fuel that spurs the state’s consumption-based economy.
The annual cost of the proposed tax package to the state’s budget is $87 million, with another annual cost to local governments of $42 million. There’s $65 million in one-time items like sales tax breaks on back-to-school supplies and disaster preparedness.
Democrats on Thursday raised questions about whether the House plan to award new tax breaks to businesses was responsible amid growing concern over coronavirus.
Before the coronavirus hit, state economists were warning legislators to brace for a recession and suggested that a “Black Swan” event like an epidemic, a hurricane or other disaster could wipe out state surpluses. Now, fears that coronavirus could disrupt Florida’s economy and the state budget, both of which are highly dependent on tourism, are emerging.
Miami has already canceled this month’s Ultra Music Festival, which draws up to 55,000 people from around the world. And Senate President Bill Galvano, R-Bradenton, said the state might have to spend $10 million to $20 million to combat the crisis, although Gov. Ron DeSantis said the state could draw that money from state reserves.
“Have we considered how this global health crisis will suck money out or affect Floridians?” asked Rep. Al Jacquet, D-Lantana, as the House debated the tax bill.
Rep. Bryan Avila, R-Hialeah, the sponsor of the House tax package, did not answer the question.
“I don’t think that’s the substance of this bill,” he said.
He defended the policy of giving preference to businesses over working families because businesses “employ many of our workers.’’
“I wouldn’t see this as giving away refunds,’’ he added. “I see it as giving away funds we weren’t intended to have in the first place.”
The repeated tax cuts come at a time when Florida’s economy is at a crossroads.
Recession impact lingers
An analysis by the Pew Charitable Trusts found Florida is one of only five states whose tax revenue has not returned to pre-recession levels. State economists note that because Florida’s tax revenues were unusually high leading up to the recession, returning to those levels has been a harder climb than for most other states.
Since then, state lawmakers have made it tougher to raise taxes, proposing a constitutional amendment that voters passed in 2018 requiring a two-thirds vote of the Legislature to do so.
Galvano said Thursday that it’s apparent that the coronavirus is already having an effect.
“That means we need to continue to put emphasis on our reserves,’’ he told reporters. “It also makes a case for having a messaging entity like Visit Florida.”
Florida lawmakers have yet to resolve their differences over the $91 billion budget and, with one week left in the annual session, it is unclear whether all the pieces of the tax plan crafted by the Republican-controlled House will survive.
The House spent more than an hour Thursday rejecting attempts by Democrats to either reduce the tax breaks being carved into the annual budget, or steer the money into programs that serve the working class instead of corporations.
For example, Democrats tried and failed to cancel the $543 million in corporate income taxes scheduled to be refunded this year to the state’s top 1% of businesses as part of the 2017 federal Tax Cuts and Jobs Act.
Democrats proposed keeping the money and shifting the revenue to a series of other areas — school resource officers, coronavirus response, teacher pay raises, state worker pay raises, affordable housing, reductions to the business rent tax, college textbook tax exemptions and land preservation.
But each of the amendments was rejected by the Republican-majority House on party-line votes.
The big winners in the House tax package include the commercial airline industry, rental car companies, charter school companies, heavy-equipment dealers, Florida Power & Light and surplus line insurers.
The highlights of the bill include:
▪ A $60 million reduction in the state communication services tax by lowering the communications services tax by .5% for anyone who purchases a mobile phone, video or satellite service.
▪ $42 million three-day back-to-school sales tax holiday Aug. 7 through Aug. 9.
▪ $5.6 million seven-day disaster preparedness sales tax holiday in early June.
▪ A $33 million, .1% reduction, in the Sales Tax on Commercial Leases, also known as the business rent tax.
▪ $5 million to reduce the aviation fuel tax, a provision sought by the commercial airline industry.
▪ $6 million to rental car companies, a provision sought by Avis, Enterprise and Hertz.
▪ $20 million to companies that operate or rent heavy machinery.
▪ $1.8 million a year to allow Florida Power & Light and other utilities to delay the date on which it starts paying taxes on dozens of solar energy plants under construction across the state.
▪ Lower Florida’s tax rate on surplus lines insurance premiums from 5% to 4.94%.
The bill also eliminates an unused pool of money for professional sports stadiums, expands a tax-distribution requirement for charter schools, and adds water infrastructure projects to the list of allowed uses for local tourist-development dollars.
In Miami-Dade County, it restructures the authorized uses of tourism-related taxes by adding parks and trails, and water-quality improvement to the list of projects that could be financed from the tax.
The wide-ranging bill also allows all counties to use tourist development tax proceeds for water-quality improvement projects, including septic-to-sewer conversion programs.
Rep. Carlos Guillermo Smith, an Orlando Democrat, tried and failed to repeal the rental car tax break and the aviation fuel tax, calling them attempts at “double-dipping” as the corporations attempted to use a federal tax break to lower their state taxes.
“This is a $6 million giveaway to rental car companies,’’ he said. “With that we could hire 120 new teachers in our public schools.”
Avila said the rental car tax rebate was needed because after the 2017 federal tax law, some companies saw their tax bills in Florida rise 700% or $15 million, and legislators thought that was excessive.
Smith countered that the reason the rental car companies owed the taxes is that they had been able to use federal law to defer state taxes but when the federal income tax law changed in 2017, they lost that tax shield and were forced to pay what they owed.
Rep. Anna Eskamani, an Orlando Democrat, attempted to amend the bill to close the corporate income tax loophole with a provision called “combined reporting,” similar to 29 other states.
She cited Circle K stores, which transferred its rights to its trademarks to a Delaware company so that it could reduce its corporate income tax in Florida by $3 million. But her attempts failed, as have similar attempts to remove that provision by Democrats in previous years.
“If Florida were a country, we would rank 16th in terms of our economy, we generate over $1 trillion in GDP,’’ said Avila, arguing that Florida’s predictable tax structure has contributed to the state’s ability to grow.
“If we were a country, we wouldn’t have to worry about this, because it would be harder to find those loopholes,’’ Eskamani responded.