Covid-19 has hit Florida with an unprecedented public health crisis that has exposed and worsened social inequality, triggered an economic recession, and left the state with extraordinary fiscal challenges ahead. While there is no single, immediate solution to these complex fiscal issues — namely a pandemic-related revenue shortfall totaling at least $5.6 billion over the next two years — one thing is for certain: state budget cuts would only increase hardship for people across the state. Policymakers risk prolonging and deepening Florida’s challenges by slashing taxes, investment in public services, and assistance to counties, cities, and families struggling to keep their heads above water.
Revenue-raising solutions, on the other hand, would not only preserve the public services that are helping to keep many Floridians afloat right now; they would also usher in a more equitable, modern, and resilient revenue base for the future.
FPI’s proposal for an equitable tax code includes 21 revenue-raising strategies — several of which are discussed below — with the potential to generate $4.5 billion, at a time the state is in desperate need of funds. These measures can help policymakers make essential investments in Florida’s environment, housing, infrastructure, public health, safety net programs, and education.
Right now, over 75 percent of Florida’s General Revenue Fund (i.e., the largest standalone pot of taxpayer dollars available to policymakers) comes from sales tax collections. These collections are disproportionately paid by everyday Floridians, with local households contributing nearly five times more than tourists and three times more than businesses to overall sales tax collection. This means that local families are almost solely responsible for funding vital public services that benefit everyone — residents, businesses, and visitors alike. As such, by tapping into new revenue streams, policymakers will not only take a much-needed step toward revenue diversification but also make the tax code more equitable.
Through smart investments, it is possible to make up billions of dollars without cuts. FPI proposes initiatives to close corporate loopholes such as “combined reporting”— already implemented by 28 states and D.C.— and the “throwback rule”— adopted by 22 states and D.C. — that would generate more than $500 million in general revenue. These strategies would minimize large multi-state companies’ ability to shift income earned in Florida to other states that are tax havens (like Delaware and Nevada). Moreover, these moves would level the playing field between smaller companies doing business only in Florida and larger multi-state corporations.
Another promising area for reform and innovation that FPI highlights in its tax code cleanup plan is Florida’s outdated sales tax system, which has not kept pace with technological advancements. For example, too many out-of-state marketplace providers like Amazon, eBay, Walmart, and Etsy, in addition to single out-of-state retailers, do not collect taxes at the time of sale. Instead, Florida imposes a use tax and requires Floridians to calculate their own tax liability and pay the Department of Revenue. Unfortunately, compliance is low. Instead, Florida could take a more modern approach by enforcing sales tax collection on items delivered to Floridians from out-of-state retailers and require marketplace providers to collect and remit taxes. This approach would generate over $700 million in revenue.
Florida will only thrive post-pandemic if everyone pays their share. A well-designed revenue system is essential to maintaining the Sunshine State’s economic health and moving the state closer to the goal of widespread prosperity.