While this year provides Florida voters with one of the longest ballots in quite some time, there is only one amendment that Florida TaxWatch has endorsed.
Amendment 10 would allow for a reduction of tangible personal property (TPP) taxes in Florida, and provide a much-needed benefit to Floridas small businesses and another economic development tool for local governments to help encourage capital investment and the creation of new jobs.
TPP taxes apply only to businesses, and are assessed on most property (excluding real property --i.e., land and buildings), including machinery, equipment, furniture, computers, signs, supplies, and other tangible items.
In the summer of 2011, Florida TaxWatch convened a Tangible Personal Property Task Force to examine the effect of repealing or reducing this tax. The task force found that reducing TPP taxes could lead to significantly promoting capital investment and job creation in Florida. This is especially true in the areas of manufacturing, and the states Qualified Targeted Industries -- those industries the state most wants to attract. These types of industries are not geographically captive, and often taxes play a large role in location decisions.
In addition, economic simulation modeling performed by Florida TaxWatch shows that exempting manufacturing and targeted industry businesses that are already here would provide a significant increase in private-sector jobs and gross domestic product.
This Florida TaxWatch research (which was awarded the national Most Distinguished Research award by the Governmental Research Association in 2012) shows that the amendment would save small businesses $20.1 million and would add an additional 156,000 accounts (nearly half of existing accounts) to the exemption.
The Legislature would have the ability to offer, through statute, additional types of TPP tax relief, which could allow local governments to target sought-after industries. This provision has led both the Florida League of Cities and the Florida Association of Counties to support Amendment 10.
Amendment 10 would allow for TPP tax reduction in two ways: one mandated by the amendment, and the other at the discretion of local governments. The first is a change to the assessed value limit of the exemption.
The current $25,000 (in assessed value) exemption would be expanded to fully exempt those businesses that own less than $50,000 of TPP. However, this is not a doubling of the current $25,000 exemption. Instead, if the taxpayer has less than $50,000 of TPP, the taxpayer owes nothing. A taxpayer that has more than $50,000 of TPP would still get only the current $25,000 exemption. This means the new exemption would be largely limited to small businesses, although larger businesses with multiple locations and property tax accounts could potentially qualify.
The second option for relief would allow local governments to offer additional TPP tax relief by ordinance. The legislature would have to enact general legislation to set the parameters, and then it would be up to the governing body of the local government to decide whether or not to offer the exemption.
It is important to note that even though Amendment 10 would initially result in a small reduction in tax revenue, this does not mean that local governments will lose $20.1 million annually. When tax rolls are rising, as they are currently, local governments can recoup such reductions through increases in overall taxable values. To put it in context, total property tax collections in Florida in FY 2011-12 were $24.5 billion. Even without raising millage rates, the proposed exemption is worth less than one percent of the more than $800 million in property tax growth revenues forecast for FY 2013-14.
The TPP tax discourages investment and high value, capital intensive business growth in the state. Property taxes have become businesses largest tax expense and Floridas property tax burden is higher than most states. Billions of dollars in the tax burden have already been shifted to businesses property taxes due to the Save Our Homes initiative.
Amendment 10 would provide a big boost to Floridas small businesses by freeing them not only from paying TPP taxes, but also from the time consuming, complex, and costly process of filing. It would also reduce the administrative burden on local property appraisers. And perhaps most importantly, it would provide a valuable tool for local governments to useat their discretionto help attract new investment and jobs to their areas.
Florida TaxWatch strongly supports Amendment 10.
TaxWatch research on this issue is available on our website: www.floridataxwatch.org
Dominic M. Calabro is president and CEO of Florida TaxWatchin Tallahassee.
