Florida House and Senate budget negotiators have agreed to a tax shift that could benefit corporations doing business in the state.
Proponents say the "single sales factor" formula would remove a tax disincentive for corporations to locate property and jobs in Florida.
Floridas current tax formula apportions sales (50 percent), property (25 percent) and payroll (25 percent). Companies that have a relatively large share of jobs and facilities in the state, but primarily sell their products outside Florida, argue that the current formula penalizes them for investing more capital in-state to expand their production and increase jobs.
Under the proposed shift, companies that invest at least $250 million in qualified capital expenditures could opt for taxation based only on sales.
"This removes a tax disincentive for a corporation to locate property and jobs in Florida," said Florida TaxWatch president and CEO Dominic Calabro.
TaxWatch says its studies have shown that single-sales formulas for the corporate income tax generate "significant economic growth" for states that adopt them.
But others paint less rosy scenarios.
The Florida Center for Fiscal and Economic Policy argues that lost tax revenues resulting from the change in the apportionment formula could impair the ability of Florida to provide vital and critical needed services.
Even worse, the center claims that a single-sales formula could pervert tax policy.
In the extreme, a manufacturing company that produced its entire product in Florida but sold it all outside of Florida would pay no corporate income tax to Florida, the center states.
"In contrast, companies with a relatively small share of property and payroll in Florida, but a significant share of their total sales in our state, would experience an increase in their corporate income tax.
"In other words, if Florida were to change to a single-sales factor some corporations would receive tax cuts and others would experience a tax increase," the center argues.
Gov. Rick Scott took a more direct approach in his proposed budget, which called for a phase-out of corporate taxes altogether.
The inclusion of a single-sales formula (House Bill 1703) into the budget by Sen. Don Gaetz, R-Niceville, and Rep. Steve Precourt, R-Winter Garden, signals that the Legislature's Republican leaders aren't ready to take that bold a step.
TaxWatch studies maintain that the tax shift "will increase long-run economic growth." And as more states adoptsingle-sales factors, Calabro warns that Florida faces "the very real risk of losing jobs, businesses, capital investment and economic activity" by sticking with its current corporate-tax formula.
"While we will continue to recommend that the expenditure threshold in the current measure be lowered to allow this economic development tool to be targeted to many more industries, we commend the Legislature for taking this step," said Calabro.
"It will be a valuable asset in the governor and Legislature's program to bring more jobs to our state."
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Contact Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
