1997 March – Backgrounder #20 – Flor⁠i⁠da’s In⁠t⁠ang⁠i⁠bles Tax: A Large Burden for a Small Re⁠t⁠urn

By: The James Madison Institute / 1997

Executive Summary

Florida’s intangibles tax is a tax on certain financial assets, including stocks, bonds, loans, and related items.
The intangibles tax raises a relatively small amount of revenue. In 1996 the tax raised $720 million out of a state budget of $39.1 billion. Thus, intangibles tax revenues finance less than two percent of the state’s budget.
Intangibles tax revenues have increased substantially since 1990, both in absolute terms and as a percentage of Florida’s budget. Thus, it seems reasonable to review the impacts of the intangibles tax more closely to evaluate the desirability of the tax, and of recent changes in the tax.
About half of intangibles tax revenues come from individuals and half from businesses. Stocks are the largest group of assets on which individuals pay the tax, while loans (including accounts receivable) are the largest group of assets on which businesses pay.
A tax on intangible financial assets has some similarities to a tax on the 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 the income is earned.
The tax places a significant reporting burden on individuals who must pay Florida’s intangibles tax. This is the only Florida tax the 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. As a tax on investment, the intangibles tax discourages economic growth.
Since the intangibles tax rate has been increased in the 1990s there is now a greater incentive to seek legal methods of tax avoidance, and there is some evidence that avoidance activity has increased since the rate increases took effect.
Florida’s economy and its state government would fare better financially if the intangibles tax on individuals were repealed.