Sun Sentinel Broward Edition
Legislature gives $1B in tax revenue to big business
The Florida Legislature, in keeping with its shameless reputation, is about to tax consumers more so that it can tax the business community less. The pity of it is that the legislation started out very decently. But Tallahassee is often where good intentions go to be corrupted.
Tax reform was the original basic and sole concept of House Bill 15 and Senate Bill 50, which are up for debate in the state House today. The bills require all out-ofstate retailers to collect and remit the sales tax that Florida customers would pay if they made the purchases from nearby stores. That puts an end to a competitive disadvantage that Florida-based businesses were entitled to resent.
Until the U.S. Supreme Court changed its mind three years ago, a state could tax remote sales only by companies that had a physical presence in that state, like Lowe’s or Home Depot. As proposed now, any internet or mail-order concern that does $100,000 or more a year in businesses with Floridians must collect Florida’s 6% sales tax, plus the surtaxes that some counties have levied.
But instead of applying the state’s share of this new revenue of about $1 billion a year to public purposes, the scheme that evolved is to use it first to replenish the depleted Unemployment Compensation Trust Fund. Former Gov. Rick Scott cut benefits to laidoff workers so employers could pay less into the fund, and what was left was insufficient for the coronavirus pandemic. Once it’s built back to some $4 billion, the money will be used to cut sales tax on commercial rentals from its current 5.5% to merely 2%.
The tax reform component is still there, but it’s the business community that will reap the benefit rather than Florida’s schoolchildren or the overworked and underpaid staffs of a prison system in crisis.
Democrats objecting to the business tax givebacks have suggested amendments to serve the public interest rather than special interests. One would reduce the overall sales tax rate to 5.75, marking the first-ever such reduction. The majority Republicans, however, are in no mood for any of this.
Floridians already owe the tax on purchases ordered out-of-state. But compliance is “notoriously low,” as a staff report somewhat charitably stated it. The new legislation will require it be collected and put Florida retailers on equal terms with their out-of-state competitors, a fairness long sought by Florida’s homegrown businesses. And after all, mail-order consumers will only be paying what they legally owed all along.
The taxpayers have no legitimate complaint with that, but the diversion of the proceeds is unacceptable.
Most of the taxes Floridians will newly pay won’t do a thing for the schools, the prison system, the environment, a sadly inadequate pre-kindergarten program or any of the other abundant needs that the state government has routinely and often willfully neglected. For example, the Legislature over the years has plundered some $2 billion from the affordable housing trust fund and is moving now to permanently divert two-thirds of annual revenue earmarked for affordable housing to water-quality and sea-level rise mitigation projects. That’s a bait-and-switch scam in the eyes of those citizens and officials who lobbied for the housing program to be established.
Fighting the effects of climate change is vital, to be sure, but so is affordable housing. Robbing one urgency for the sake of another is an old Tallahassee trick, but it’s particularly odious when the special interests that employ the most effective lobbyists are benefiting.
The commercial rental tax cut isn’t in the version the Senate passed 30-10, so if the House insists on it, the Senate would need to vote again. That means more opportunities, however long-shot, to spend the proceeds for a greater public benefit.
For now, Senate President Wilton Simpson, R-Trilby, has called the sales tax bill “probably the single largest tax break for small business that we would probably ever pass.”
It could also be described as probably the single largest consumer scam that the Legislature would probably ever pass. And it will go to all businesses, of course, not just small ones.
The cheerleading lobbies include the Chamber of Commerce, which contends employers will be able to rehire workers with the money they otherwise would have to pay into the unemployment trust fund. However, that would still leave Florida with the nation’s most inadequate benefit schedule for laid-off workers. And there’s no predicting whether the people who own shopping centers and other commercial real estate will pass the savings on to their tenants or simply raise their rents proportionally. Either way, it will be at the consuming public’s expense.
The business community is already far short of paying its fair share. Florida is supposedly the only state with a sales tax on commercial rentals, so there’s room for arguing that it should be replaced. But Florida is also a state that has systematically carved so many exemptions in its corporate tax that 99 out of 100 corporations don’t pay anything and those that do don’t pay much. That’s according to an investigation by our sister paper, the Orlando Sentinel, two years ago.
What corporations pay, or even whether they pay anything, is normally kept secret by law. The Sentinel examined disputes that went to court for a window on the extent of corporate tax avoidance in Florida.
“In recent years,” the Sentinel reported, “Mastercard Inc. saved more than $20 million in Florida income taxes by claiming that none of its sales occur in Florida. Verizon Wireless saved more than $23 million by passing hundreds of millions of dollars of profits out of the state. And HCA Healthcare Inc. saved more than $28 million in large part by moving money through a maze of subsidiaries.”
Plugging those loopholes would more than pay for cutting the rental tax, and new revenue from online sales taxes could be used for any of the many desperately underfunded areas in our state budget. Instead of that, we have yet another reminder of who the Legislature’s true constituents really are.