2004 December – Backgrounder #42 – Is Flor⁠i⁠da’s Tax S⁠t⁠ruc⁠t⁠ure Ready for ⁠t⁠he 21s⁠t⁠ Cen⁠t⁠ury?

By: The James Madison Institute / December 1, 2004


December 1, 2004

Executive Summary

Some critics of Florida’s tax structure say it is antiquated and unless it is reformed, Florida will face severe revenue shortfalls in the future. This claim is not consistent with the evidence.
Under Florida’s current tax structure, total state revenues, total tax revenues, and sales tax revenues are all growing along with Florida’s economy. Florida’s tax system is structurally sound and prepared for the 21st century.
More than half of the state’s tax revenues come from sales taxes. For this reason, Floridians must be cautious about reforms that might affect the sales tax.
One of the more frequently-suggested tax reforms has been to extend Florida’s sales tax to services. Recent proposals do not distinguish retail services from intermediate services, making those reforms undesirable. Florida should not extend the sales tax to intermediate services, and little revenue would be raised by extending the existing sales tax only to retail services.
A policy of periodically reviewing all sales tax exemptions has been proposed in various forms. Such a periodic review would create uncertainty, would generate substantial lobbying efforts, and would not be a good use of the legislature’s time. The legislature can already review any exemptions it wants at any time. A required review of all exemptions would be bad policy.
Some Florida legislators have suggested that Florida fully participate in the Streamlined Sales Tax Project, which is designed to collect taxes on Internet sales from out-of-state sellers. This would subject Florida’s main source of tax revenues to regulation from a multi-state body. Because there is no compelling need to participate, Florida should not modify its tax laws to participate in the Streamlined Sales Tax Project.
Florida has considered eliminating its intangible property tax for years. The state has sufficient revenues to repeal this tax on seniors and savers, and should do so this legislative session.
Florida’s communications services tax is complicated, ambiguous, and is among the highest in the nation. Thetaxshould be reformed by simplifying its structure and reducing its rates.
Florida has sometimes been referred to as a low-tax state. While Florida’s per-person tax revenues are below the national average, they are very close to the average for southeastern states, and they are well above many southeastern states. Florida is not a low-tax state.