Sun Sentinel Palm Beach Edition
Corporations lobbying for tax cuts amid state budget shortfall
This spring, PetMed Express Inc., a nationwide pet pharmacy that sells nearly $300 million a year worth of medicines and supplies, got a six-figure gift from the state of Florida: A $285,000 income tax refund.
Meanwhile, the company that owns Centennial Bank — which has branches in four states and $15 billion in assets — recently revealed that it paid $1 million less in Florida taxes last year.
The tax savings for both companies stem from a roughly $2 billion package of temporary corporate tax cuts that some of the world’s biggest businesses lobbied through the Republican-controlled Florida Legislature in 2018 and 2019 — before the COVID-19 pandemic
ripped a multibillion-dollar hole in Florida’s finances.
Those corporate tax cuts are scheduled to expire at the end of next year. But now, citing the global pandemic, businesses are pushing state leaders to turn those temporary cuts into permanent breaks.
In a new report issued this month, a “COVID-19 Taxpayer Task Force” — which is led in part by lobbyists representing Publix Supermarkets Inc., Walt Disney Co. and Walmart Inc. — called on state leaders to avert what it called a looming “tax increase” for corporations.
“This tax increase would be a blow to companies trying to recover from the impacts of the COVID-19 pandemic,” the task force wrote in its report.
Opponents accuse corporate giants of exploiting the coronavirus crisis to continue a more than decade-long campaign to do away with Florida’s corporate income tax, which is already among the easiest to avoid in the nation. Only about 1% of Florida business pay the tax at all.
They say Florida should focus on strengthening its corporate tax rather than weakening it, especially during a pandemic that they say has exposed a threadbare state safety net. Earlier this year, for instance, more than 37,000 small businesses in Florida were turned away from an emergency loan program because it ran out of money, and many Floridians are still struggling to claim unemployment benefits through a state system that was designed to limit payouts.
Florida’s fiscal outlook continues to worsen. State economists recently estimated that Florida will face a $5.4 billion budget shortfall over the next two years.
“We should look at the corporate income tax as a way to raise revenue — instead of doing things that are more regressive,” said Sadaf Knight, the chief executive officer of the Orlando-based Florida Policy Institute, a left-leaning think tank. “There’s a whole host of ways we could raise revenue in Florida that could help us avoid cuts and also have a better tax base.”
Florida’s $2 billion package of temporary corporate tax cuts stem from a pair of laws state lawmakers passed after President Trump and the then-Republican-controlled Congress overhauled corporate taxes at the federal level.
That 2017 federal law — known as the “Tax Cuts and Jobs Act” — cut the federal corporate income tax rate by 40%. But it also made changes that forced companies to report higher profits on their tax returns by limiting some deductions.
The combined effect produced one of the largest corporate tax cuts in American history. But it also meant that corporations might have to pay some higher state taxes because of the new limits on deductions.
So Florida lawmakers decided to help corporations out by passing a four-year package of state cuts. Lawmakers agreed to the tax cuts before they had any idea how much they would ultimately cost; economists later estimated the roughly $2 billion price tag, which is more than Florida spends annually on affordable housing and pre-kindergarten combined.
There are two parts to Florida’s temporary corporate tax cuts.
First, the state refunded a portion of the taxes corporations paid in 2018, the first year after the new federal tax law went into effect. Those refunds — which totaled about $540 million — were issued this spring, after Republican Gov. Ron DeSantis declined to use his emergency powers to suspend them.
Altogether, the state Department of Revenue says it sent refunds to just under 20,000 corporations. But the savings were heavily concentrated at the very top: More than half of the money — $274.8 million — went to the state’s top 100 taxpayers.
In addition to refunding tax payments from 2018, Florida also lowered its corporate tax rate by nearly 20% — from 5.5% to 4.458% — for 2019, 2020 and 2021.
Economists expect that reduced tax rate will save corporations roughly $1.5 billion more.
Corporate tax returns are confidential under Florida law, so there is no way to know the exact tax savings for every company. Anheuser-Busch InBev SA, Comcast Corp., Disney, Ford Motor Co., Pfizer Inc. and Avis Budget Group Inc. all lobbied the Legislature over the issue, according to lobbyist disclosure records, emails and other documents.
Some companies have disclosed savings to investors. The insurance company HCI Group Inc. got a tax refund of as much as $282,000, according to its regulatory filings. Heritage Insurance Holdings Inc., another insurer, reported a $422,000 state tax refund.
Meanwhile, companies ranging from agribusiness Alico Inc. to Ameris Bancorp to the Daytona Beach-based insurance broker Brown & Brown Inc. have all said they are saving money because of Florida’s temporarily reduced tax rate.
“Although we are currently in a very cash strong position due to the performance of our company over the past five years, usually refunds like the one we received would give us more financial flexibility to increase hiring and more equipment to grow our business,” said Bruce Rosenbloom, the chief financial officer for PetMed Express, which is based in Delray Beach and got a $285,000 refund.
Florida’s corporate tax rate is set to return to 5.5% in 2022.