In a recent appearance on Bloomberg TV, Florida Governor Rick Scott announced plans for a $500 million tax cut. While the plan is still in the drawing board phase, he is committed to working with the legislature to devise the right path to provide tax relief to Floridians. Further, Gov. Scott stated that his long term goal is the complete elimination of the Sunshine State’s corporate income tax. Gov. Scott’s proposals are good ideas and would benefit the Florida economy and taxpayers.
Now is the perfect time to for tax reform in the Sunshine State. Florida has the highest revenues in state history, and is projected to have an $850 million budget surplus next year. Even after implementation of the $500 million tax cut proposed by Gov. Scott, the state would still be left with a $350 million surplus. Scott’s current priority—the $500 million tax cut—would result from the reduction of recently imposed fees and business tax relief. His long term goal of complete elimination of the corporate tax would have even more of an economic impact.
At 39.2 per cent, the U.S. has the highest corporate income tax in the world. It behooves states to avoid exacerbating this disadvantage with high state corporate taxes, because the fact is that Corporations do not pay taxes, people do. There is a wealth of evidence now showing that the burden of the corporate income tax is borne by ordinary workers in the form of lower wages and by consumers through increased prices. Further, millions of 401(k) and IRA owners own shares in corporations which serve as their retirement plans. But, when after-tax profits decrease because of higher taxes, the value of 401(k) and IRA plans also decreases. Corporate taxes can hit seniors especially hard.
There is a large body of economic research that finds the corporate tax to be one of the most economically destructive taxes on the books. While that alone is a good reason to zero out state corporate taxes, another good reason to scrap them is that they don’t even generate that much revenue for state coffers. Florida’s corporate income tax generated only a little over $2 billion in revenue last year, representing a paltry 2% of the state’s general fund. Corporate taxes hurt individuals, families, and employers, and for all of that harm, they don’t even bring in that much revenue to boot. Gov. Scott is wise to recognize that the optimal state corporate tax rate is zero. Significant corporate tax relief was also signed into law this year by New Mexico Gov. Susanna Martinez (R) and North Carolina Gov. Pat McCrory (R).
Florida has succeeded in attracting new businesses and growing its economy in large part due to tax cuts, and pro-business, pro-growth policies championed and implemented by Gov. Scott. Americans for Tax Reform applauds Governor Rick Scott's $500 million tax relief proposal. While many in Washington – on both sides of the aisle – champion the need for tax reform, Gov. Scott's latest proposal reminds everyone once again that states are the scenes of action – not just talk. While many in Washington—on both sides of the aisle—champion the need for corporate tax reform, Gov. Scott’s latest proposal reminds everyone once again that the states are the scenes of action—not just talk. And it is Republican governors leading the way on showing Washington what a successful reform agenda—and the political will to implement it—looks like.