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  1. Opinion

PolitiFact Florida: $1 billion Florida tax hike? Andrew Gillum proposes increasing state corporate tax

Florida gubernatorial Democratic nominee Andrew Gillum gives a campaign speech in front of his supporters who gathered at the International Union of Painters & Allied Trades Local 1010 in Orlando on Aug. 31. (OCTAVIO JONES   |   Times)
Florida gubernatorial Democratic nominee Andrew Gillum gives a campaign speech in front of his supporters who gathered at the International Union of Painters & Allied Trades Local 1010 in Orlando on Aug. 31. (OCTAVIO JONES | Times)
Published Sep. 23, 2018

A TV attack ad portrays Florida Democrat Andrew Gillum as so "far out" that he is on another planet.

"Gillum wants to increase Florida taxes by a billion dollars. Disaster for the economy," says an ad by the Republican Governors Association showing Gillum's headshot floating in space.

The 30-second ad also attacks Gillum over his support for Medicare for All and abolishing the U.S. Immigration and Customs Enforcement. Here we'll focus on whether Gillum wants to raise Florida taxes by $1 billion.

He does, though the ad doesn't make clear what taxes Gillum wants to raise, who would pay, and how Florida would spend the additional revenue.

Gillum's tax plan

Gillum has proposed increasing Florida's corporate tax rate from 5.5 percent to 7.75 percent to generate an additional $1 billion a year. His opponent, Republican Ron DeSantis, has signed a pledge not to raise taxes.

Gillum said he would put that extra revenue toward education, including a minimum teacher salary of $50,000 and raising pay for veteran teachers to the national average. Gillum also plans to invest in early childhood education programs and vocational training.

The state corporate tax currently generates about $2.5 billion a year. Most businesses, however, are exempt from paying any tax because the state exempts the first $50,000 in taxable income.

Gillum's campaign said he would keep that exemption to protect small businesses, but said he wants to close loopholes that allow other corporations to avoid paying taxes.

Who ends up paying for corporate taxes

Put simply, Gillum's plan is to have Florida's biggest corporations pay $1 billion more a year in taxes. That could affect average Floridians, experts told us. But it is difficult to put a dollar figure on it.

Kurt Wenner, vice president of research at Florida TaxWatch, said that if a business is forced to pay more in taxes, it can raise prices, reduce employment, reduce costs or investment, or reduce profits.

"Those outcomes would all potentially have negative impacts on residents," Wenner said. "The magnitude of those impacts would be hard to quantify, especially factoring in any economic increase from increase government spending."

There's also no way to guarantee that the full $1 billion would flow into the state's revenues. Corporations could take legal tax planning measures to reduce their liability. That could make funding Gillum's education priorities more challenging.

At the same time, an increase in the tax rate could have negative impacts on corporations' decisions about where to locate and whether to expand.

Richard Auxier, research associate at the Urban-Brookings Tax Policy Center, said the cost of corporate taxes is shared among stockholders and, unintuitively, among a broader group of workers and investors. The Tax Policy Center assumes 80 percent of the burden is borne by investment returns (dividends, interest, capital gains, etc.), with the remaining 20 percent weighing on wages and other labor income.

"Would average Floridians pay some of a corporate tax hike (in the form of lower wages and/or higher prices)? Yes. Would they pay a lot? Nope," Auxier told PolitiFact. "Would investors and managers (who are not all in Florida because multistate companies pay the tax, too) pay a lot? Yup."

Randall G. Holcombe, a Florida State University economics professor, said that a higher tax would discourage business.

"Floridians who do not directly pay corporate income tax will still bear a cost of slower economic growth in Florida," he said. "They may also pay higher prices if corporations are able to pass through that tax increase to customers, but the big cost will be slower economic growth."

The claim is accurate but needs additional information. We rate it Mostly True.

Read more rulings at PolitiFact.com/florida.

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