06/01/03 - Backgrounder #40 - Florida's Intangibles Tax: The Case for Repeal
by Randall Holcombe June 1, 2003
Executive Summary • Florida’s intangibles tax is a tax on certain financial assets, including stocks and bonds. • The intangibles tax raises a relatively small amount of revenue. It is forecast to raise about $600 million in fiscal year 2003-04, out of a total state budget that will exceed $50 billion. Revenues from the intangibles tax finance about 1.2 percent of total state expenditures. • A tax on intangible financial assets has some similarities to a tax on income from those assets. While income taxation is prohibited by the Florida Constitution, an intangibles tax gets around that restriction by taxing the wealth on which income is earned. • The tax places a significant reporting burden on some individuals. This is the only Florida tax that requires individuals to fill out a tax form. • The tax discriminates against those who earn investment income as opposed to labor income. This group includes wealthy people and retirees, who in general contribute more to the finances of Florida’s government than they take away. • Because it is a tax on investment, the intangibles tax discourages economic growth. • If the tax were completely eliminated, state government expenditures would still increase because the revenues lost would be more than replaced by the normal growth in the state’s other revenue sources. • Florida’s economy and its state government would fare better if the intangibles tax were repealed.
