Tax Reform

State of the State: Florida

On January 12, Governor Rick Scott gave his State of the State address to open the 2016 legislative session. Coming off a 2015 session characterized by major tax cuts of nearly $400 million and an ALEC-Laffer Rich States, Poor States Economic Outlook Index ranking of 15th, Scott proposed an additional $1 billion in tax cuts in the 2016 legislative session.

Governor Scott’s address was short and to the point, focused on job creation and advancing prosperity, and noted prosperity doesn’t “come from top down” government activism. In line with the 2014 campaign promise to cut $1 billion in taxes, Governor Scott’s address focused primarily on proposing $1 billion during the current 2016 legislative session. Though according to the National Association of State Budget Officers, Florida is enacting $347 million in previously passed tax cuts in 2016, it is still “on target” for 2016 revenue collection projections and expects a 4 percent nominal expenditure increase while still having 4.6 percent cushion relative to expenditures in the state rainy day fund. As the governor noted, Florida expects record state revenues in 2016.

The Miami Herald details the specifics of the billion dollars in proposed cuts in his 2016 budget which proposes $79.3 billion in spending:

“Scott would permanently eliminate income taxes on manufacturing, retail businesses and cut taxes on commercial leases over two years, and permanently eliminate sales taxes on manufacturing equipment. Those cuts alone would be worth over $1 billion. For consumers, Scott has a $46 million sales tax exemption for college textbooks for one year, and a nearly $73 million break on temporary sales taxes for back to school shopping and another for disaster preparedness supplies.”

Moreover, the governor calls for restructuring of tax incentives administered by Enterprise Florida and a $250 million “dedicated trust fund,” calling it the “Florida Enterprise Fund.” As ALEC has noted in the past, these types of targeted tax incentives, what ALEC calls “growth through planning,” are inferior to lowering taxes more broadly through the “growth through markets” approach.  Thankfully, the state does subject tax incentives to economic performance analysis, as noted in Chapter 2 of the 8th edition of Rich States, Poor States. Moreover, The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth, which focuses on tax preferences, notes Florida does among the best of any state in reporting tax carve-outs. In fiscal year 2014, Florida reported $1.57 billion in corporate tax carve-outs and $12.1 billion in carve-outs to their sales tax base.

Florida taxpayers should be thrilled at the prospects of additional tax cuts in the 2016 legislative session on top of cuts passed in 2015. Though Florida is a relatively low-tax state, the state is only ranked 34th in total state and local tax burden, according to the Tax Foundation. Florida’s tax burden—8.9% of total state income—is a still a full 1.3 percent higher than Texas, the number 46 ranked state in state and local tax burden. An additional $1 in tax cuts will go a long way towards putting money back in taxpayers’ pockets, boosting economic activity and increasing state competitiveness.

This is an entry in the ALEC Center for State Fiscal Reform series, “State of the States 2016,” which will perform analysis of tax and budget issues raised in every state of the state address delivered by America’s governors. Check back frequently over the coming weeks to see the results for your state.

In Depth: Tax Reform

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish. A…

+ Tax Reform In Depth