TALLAHASSEE — State leaders on Wednesday unveiled a plan to shore up the state’s unemployment trust fund by having Floridians pay sales taxes on their online purchases, a unique idea that amounts to roughly $1 billion in annual tax breaks for Florida businesses.
The idea, proposed by the leaders of Florida’s House and Senate, would require nearly all out-of-state companies to start collecting online sales taxes in Florida.
Florida is one of the few remaining states that doesn’t require online companies, aside from large ones like Amazon, to collect sales taxes. State economists estimate it would add $1 billion in annual revenue to state coffers.
But instead of using that money to pay for schools, roads or other projects, which sales tax revenue typically finances, the plan would divert the money to fill the state’s unemployment trust fund, which pays out benefits for jobless Floridians. That fund has fallen by roughly $4 billion since the start of the pandemic.
And businesses, particularly the state’s largest corporations, would see a big benefit under the proposal: their unemployment insurance rates, which usually fills the unemployment trust fund, would not go up.
Companies currently pay a minimum of $7 per employee per year into the fund, one of the lowest rates in the nation. That’s slated to go up to $87 next year, however, under a sliding scale that state lawmakers years ago tied to the unemployment rate.
Under the plan released by House Speaker Chris Sprowls, R-Palm Harbor, and Senate President Wilton Simpson, R-Trilby, businesses would keep paying that $7 per employee per year for the next five years, or until the trust fund returns to pre-pandemic levels.
“This fiscally responsible legislation will cut taxes for our business owners, ensure that Florida’s small businesses and retailers with a physical presence in our state are competitive, and keep us the most business-friendly state in the nation,” Sprowls said in a statement.
The idea was also quickly championed by the Florida Chamber of Commerce, whose members include some of the state’s largest corporations.
“Today’s welcome announcement benefits Florida’s main street businesses by leveling the playing field on sales tax collections, while at the same time providing much needed relief from a looming $713 million tax increase on employers,” Florida Chamber of Commerce President and CEO Mark Wilson said in a statement.
In effect, the burden of replenishing the fund would fall to Floridians who buy things online, rather than on the state’s largest corporations, said state Rep. Anna Eskamani, D-Orlando. She noted that the idea would be more beneficial to larger companies with more employees.
“The small business community really isn’t the one getting the bail out here — it’s the biggest of companies who are already paying so little,” Eskamani said. “And it’s the public subsidizing an unemployment system that was designed by the Republican majority and big businesses to fail.”
The proposal will be amended to Senate Bill 50 and House Bill 15 and could be voted on as soon as next week.
At the start of the pandemic, the trust fund was about $4 billion. By January, it was down to $777 million. One of the reasons why the trust fund hasn’t been completely drained is because the state’s benefits are so low. At just $275 per week, they’re some of the stingiest in the nation.
During the Great Recession, the trust fund drained completely. Rather than require companies to pay more, state lawmakers borrowed money from the federal government, an option still available to them.
The nation’s unemployment system is referred to as “unemployment insurance” because it was initially created for, and historically funded by, businesses.
Created in 1935, the nation’s system is intended to prevent the “death spiral” caused by widespread unemployment: People who are out of work have no money to spend. When they have no money to spend, businesses earn less revenue, causing them to lay people off, accelerating the cycle by further reducing the number of dollars in circulation.
Getting money into the hands of out-of-work Americans is as much an insurance policy for businesses as they are for employees. The first unemployment systems were voluntary and created by businesses, not the government, in the 1920s and 30s.
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