Facing a $1.3 billion shortage in the next year’s state budget—the largest gap in Oklahoma’s history—the Oklahoma legislature wrapped up its regular session last week with the passage of a $6.8 billion budget. The budget...
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- Florida House Counters Governor Scott
Florida House Counters Governor Scott
The Florida House of Representatives released its tax proposal yesterday, and it is worse than the mediocre plan released by Governor Rick Scott in November. The House plan includes several of the positive aspects of Governor Scott’s plan, but expands on the silly idea of sales tax holidays.
The House plan would reauthorize the back-to-school sales tax holiday. Under the plan, the state would provide a 10 day sales tax holiday in August for clothing, footwear, and backpacks costing less than $100, and school supplies costing less than $15. This mirrors Governor Scott’s plan.
The House plan does not keep a current hurricane-preparedness sales tax holiday like Governor Scott, and instead, replaces it with three new sales tax holidays. The House would create a sales tax holiday for the Saturday after Thanksgiving. Items purchased for $1,000 or less at small businesses would be exempt from the sales tax. It would add a sales tax holiday for fishing and hunting equipment purchased on August 20, 2016, a week after the back-to-school holiday. Personal computers, cell phones, and computer-related accessories would be exempt from the sales tax on April 22, 2017.
These sales tax holidays amount to $116 million in tax reductions, according to the House of Representatives Staff Analysis. Governor Scott estimated his sales tax holidays would reduce revenue by $73 million.
The plan would also extend the current sales tax exemption for college textbooks, like Governor Scott, which would reduce revenues by another $33 million. It would add a second book-related sales tax exemption. The plan would exempt books sold at school book fairs from the sales tax too.
Both of these plans rely far too heavily on sales tax holidays. We have written numerous times on the flaws of sales tax holidays. They do not generate economic growth and shift when consumers complete purchases. They also burden small businesses with additional compliance costs and paperwork.
The small bright spot is that the House plan retains two pro-growth provisions from Governor Scott’s plan. Both would exempt business inputs, commercial leases and business machinery, from taxation. Business inputs should not be subject to taxation, otherwise tax pyramiding will occur. It reduces the sales tax on leases to 5 percent, from 6 percent, for the first year, and then to 4 percent the year following. The House’s plan would return it to 6 percent beginning in 2019. The rate schedule differs slightly from Governor Scott’s plan. The plan also continue to exempt machinery and equipment from the sales tax.
Kudos to the Florida House of Representatives for trying to improve Florida’s tax climate, but they are doing this the wrong way. Sales tax holidays are not the way to improve Florida’s taxes. They are silly gimmicks that add needless complexity to a tax code. The House, and Governor Scott, should be using these revenue cuts to pass positive reforms, such as a broad-based cut to the corporate tax rate. not on expanding and reauthorizing sales tax holidays.
Follow Nicole on Twitter at @NKaeding.
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