- A constitutional amendment restricting property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. increases
- $200 million in new taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. holidays
- A reduction automobile registration fees
- A reduction local telecommunications service sales taxes
- Permanent elimination of the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. on manufacturing equipment
- Continued phase-out of the state corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax.
- Elimination of the sales tax on commercial leases
These proposals are a mixed bag. Restrictions on property tax assessments can reduce local taxation, but only if there are also restrictions on property tax rates, effective standardization of tax assessing practices, and strict limits on other local revenue sources. Otherwise, if property taxes are ineffectively capped, localities will just raise the same revenues through less transparent means like excessive fees, fines, or budget gimmicks that just push expenses further out.
Tax holidays are even worse policy. While they may be politically expedient, sales tax holidaySales tax holidays are periods of time when selected goods are exempted from state (and sometimes local) sales taxes. Such holidays have become an annual event in many states, with exemptions for such targeted products as back-to-school supplies, clothing, computers, hurricane preparedness supplies, and more. s just create additional compliance burdens while failing to promote economic growth. Florida was an early-adopter of this distortionary tax policy, taking the practice from more highly-taxed New York in 1998. But a more economically productive course than narrow carve-outs for certain goods would be general sales tax relief. If policymakers believe it is worthwhile to offer $200 million in sales tax relief, a small across-the-board rate reduction could be passed, instead of a special provision for a few advantaged retailers.
That said, Governor Scott’s plan includes some valuable proposals as well. Florida has the 4th highest cell phone taxes in the nation, so tax relief in that sector would bring the Sunshine State closer to national norms. Eliminating sales taxes on business inputs, like commercial leases and manufacturing equipment, is also sound tax policy, because taxes on business inputs create tax pyramidingTax pyramiding occurs when the same final good or service is taxed multiple times along the production process. This yields vastly different effective tax rates depending on the length of the supply chain and disproportionately harms low-margin firms. Gross receipts taxes are a prime example of tax pyramiding in action. and significant economic distortions. Finally, moving to reduce or phase out the corporate income tax would follow with a broader trend around the nation. Many states have been experiencing declining corporate tax revenues due to increasing credits and deductions, falling tax rates, and changes in income apportionmentApportionment is the determination of the percentage of a business’ profits subject to a given jurisdiction’s corporate income or other business taxes. U.S. states apportion business profits based on some combination of the percentage of company property, payroll, and sales located within their borders. formulas. In a competitive national and global environment, state-level corporate income taxes seem increasingly unable to raise sufficient revenues to justify their negative economic impacts.
Governor Scott’s tax proposals offer meaningful improvements in some areas like cell phone and corporate income taxes. But on other issues like the property tax cap, it’s not clear whether or how the plan will work; on sales tax holidays, the proposed “tax cut” would actually make the tax code more complicated and distortionary, while creating little or no economic growth.
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