October 4, 2021

3 Reasons Why Florida Lawmakers Should Fix the Corporate Income Tax

In the 2022 legislative session, policymakers should boost Florida’s corporate income tax (CIT) and use the extra revenue to invest in communities across the Sunshine State. Although the latest projections show that the CIT accounts for nearly 10 percent of general revenue, this is still nowhere near what sales taxes generate. To put this into perspective, if the total projected amount of sales tax revenue for the current fiscal year, about $27.2 billion, is Miami’s 85-story Panorama Tower – the tallest building in Florida – then CIT revenue, which is just shy of $3.3 billion, would only make it to the 10th floor.

The fact that the sales tax dominates all other revenue sources, including the CIT, means that Florida’s tax code is upside-down: lower-paid workers spend a greater share of their income on sales taxes than millionaires. And because individuals and families of color are more likely to be paid low wages due to long-term racial inequalities and bias, the state’s upside-down tax code worsens racial inequity. While there is no one silver bullet or cure-all to fix Florida’s tax code, policymakers should take action to reform the CIT and improve the current situation.

This blog will provide an overview of the reasons why policymakers should fix the CIT and recommendations on how to do it.

Reason #1: Florida Voters Want More Equitable Corporate Tax Policies

Over 90 percent of Americans agree that it is everyone’s civic duty to pay their fair share of taxes and that those who cheat on their taxes should be held accountable.

Recently, a Florida Policy Institute survey found that voters support increasing taxes on companies that make over $50 million by roughly a 4-to-1 margin after learning that several hundred large corporations do not pay CIT. The same poll found that voters equally support closing corporate tax loopholes by a 4-to-1 margin. Clearly, Floridians disapprove of corporations’ tax avoidance strategies and believe that the Sunshine State should require greater corporate tax contributions. These findings are consistently popular with rural and suburban voters — both groups enthusiastically support reforms to corporate taxes and want to see corporations pay their fair share.


State policymakers should pass combined reporting to ensure that large multistate corporations are paying taxes in Florida. Currently, corporations can avoid paying Florida’s CIT by shifting profits (e.g., via the trademark income-shifting loophole) to other entities in tax havens located in Delaware, Ireland, or the Cayman Islands, to name just a few. Florida should follow the lead of 28 states and the District of Columbia and require corporations that are avoiding taxes to add profits of all their subsidiaries, regardless of location, into one combined report. Also, policymakers could pass the throwback rule, which requires sales that are not taxable (either because they are sales into states with no sales tax authority or to the federal government) to be taxed in the state of origin (i.e., Florida). Together, these measures would generate nearly $500 million.

Reason #2: Over 90 Percent of Businesses Pay Zero CIT

The Sunshine State imposes a CIT on corporations doing business in Florida. However, the state exempts: (1) the first $50,000 of net income, (2) Limited Liability Companies (LLCs), and (3) S Corporations or pass-through businesses that have no more than 100 shareholders and whose profits flow through to shareholders’ income. Since Florida does not have a personal income tax, these profits are not taxed in the state. As a result, most businesses in Florida do not pay CITs. Even among the businesses that are not exempt, only 1 out of 10 owes a CIT. (See Figure 1.)

In tax year 2018-19, for example, over 90 percent of all businesses in Florida making under $50 million paid zero CIT. Additionally, of the 2,153 ultra-wealthy corporations that made over $50 million, 466 paid zero CIT. (See Figure 2.)


Policymakers could impose a minimum payment requirement of just $250 on all corporations doing business in Florida, including pass-through businesses. Since Florida has no minimum CIT, over 90 percent of businesses pay nothing – including 33 corporations who reported over $1 billion in taxable income in 2019. Without a minimum, many corporations will continue to exploit loopholes and/or claim so many tax breaks that they owe no income tax. To address this issue, policymakers should impose a modest minimum payment of $250 on all businesses, which would generate roughly $200 million.

Reason #3: A Stagnant CIT Rate, Downward Adjustments, and Refunds are Costing Floridians Billions

Over the past couple of years, policymakers have reduced the CIT, costing the state billions. The last time policymakers voted to increase the CIT was in 1984. In contrast, policymakers passed a bill in 2018 that created an automatic downward adjustment or reduction to the CIT rate if net collections exceed forecasted collections. The same bill instructed Florida’s Department of Revenue (DOR) to refund excess collections. The bill had an immediate impact: CIT collections exceeded forecasts for tax year 2018-19, which led to a downward adjustment. (The CIT rate went down from 5.5 percent to 4.458 percent). Also, DOR had to issue $543.2 million in corporate refunds before May 1, 2020. Of all refunds issued, about $275 million went to just 100 corporations — one half of one percent of all filers who owed CITs for tax year 2019.

In 2019, policymakers extended these triggers for an additional two years. There was no downward adjustment or refund triggered for tax year 2019-2020 due to decreased CIT collections amid COVID-19. However, for tax year 2020-2021, collections exceeded forecasts such that DOR is set to distribute $624 million in corporate refunds before May 1, 2022. Although these mechanisms are set to expire on January 1, 2022, they have already cost Floridians around $2 billion, thanks to the CIT rate reduction and refunds. Fortunately, policymakers did not pass any legislation to extend these mechanisms during the 2021 session. Nevertheless, it remains to be seen if new adjustments will be introduced during the 2022  legislative session.


Policymakers should reject any proposal to extend the automatic CIT downward adjustment and refund triggers. Allowing the CIT rate to return to 5.5 percent, as it was in 2018, would generate just over $440 million and then increasing it to 6.5 percent would generate another $426.5 million in new revenue.


Likely voters across Florida want more equitable tax policies to ensure that everyone is paying their fair share. During the 2022 legislative session, policymakers should listen to voters and reform Florida’s CIT. Policymakers could raise over $1.5 billion by adopting measures like combined reporting, the throwback rule, minimum CIT payments, ending automatic downward adjustments and refunds, and increasing the CIT rate to 6.5 percent. This would help move CIT revenue from the tenth floor of Miami’s 85-story Panorama Tower to the 15th floor – a 50 percent increase overall. The newly generated revenue would also help policymakers make more investments in public services, which would improve Floridians’ wellbeing. More importantly, these changes would help fix Florida’s upside-down tax code so that Floridians with low- and moderate-incomes are not the only ones responsible for the costs of public roads, schools, and health care.

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