Florida residents pay 6th lowest state taxes; some say burden can be still be lowered
Florida residents have the sixth lowest state tax burden in the U.S., according to a recent WalletHub report.
“Florida has the sixth lowest total tax burden at 6.79 percent mostly because the state has no income tax,” WalletHub analyst Jill Gonzalez said. “One of the advantages is that residents here pay the third lowest total taxes at $2.385 per capita, but there’s also a notion of ‘you get what you pay for’ in terms of government services, according to our taxpayer Return On Investment report.”
Florida TaxWatch president and chief executive officer Dominic M. Calabro said the low tax burden is a plus for Florida families and businesses.
“Florida’s tax climate makes it an attractive option for families and businesses alike to move to and flourish,” Calabro said. “A lower tax burden allows businesses to create more jobs and expand, while allowing taxpayers to have more money in their pockets that can then be spent and funneled back into the economy.”
Calabro said Florida still could do more to reduce the tax burden. His organization “also called for burdensome taxes to be cut to improve our tax climate further.”
The proposed changes include reducing or eliminating the state’s business rent tax and communication services tax.
According to a briefing published by Florida TaxWatch, “Florida subjects commercial lease and license payments to the state and local sales tax and it is the only state in the nation that does so.”
As a result, Florida TaxWatch said the state government mandated an increase of up to 8 percent in occupancy costs for all business that rent property, “a cost they would not incur in any other state.”
“Florida businesses pay more than $1.7 billion a year as a result of this tax,” the briefing said.
In addition, Florida TaxWatch said renters must pay local option sales taxes, increasing the tax burden for these businesses by an estimated $230 million.
In a separate briefing, Florida TaxWatch said, although the combined state and local tax rate in the state tops out at 7.5 percent, the purchase of cell phone and other taxable communications services drives the tax rate to more than 14 percent and even in excess of 16 percent.
“Florida has one of the highest tax rates on communications services in the nation,” the briefing said.
Richard C. Auxier of the Urban Institute/Tax Policy Center, said it’s important to understand what rankings like the ones reported by WalletHub “say and what they don’t say.”
According to Auxier, Urban Institute has found that “state tax cuts do not automatically lead to economic growth.”
Auxier said “politicians certainly care about rankings like WalletHub’s, but the study only analyzed property tax, individual income tax, sales tax and excise tax.
A business considering moving its operations to Florida would want to know about other taxes such as corporate income taxes, gross receipts taxes, fees and all the taxes levied at the city or county level, he said.
In addition, he said state residents are also affected by different taxes.
“For example, Florida does not tax income,” Auxier said. “That’s great if you’re earning a lot of money. But if you’re not earning much, Florida’s no income tax is not helpful and its high sales tax is harmful, and there are states with far better tax systems for you.”
Auxier said “businesses think about a lot of things other than taxes.” He said a 2016 study ranked highway access, availability of skilled labor and cost of labor as the most important business location factors, “with tax incentives and rates ranking fifth or lower.”
Meanwhile, Auxier said individuals consider schools, commute times and other issues when deciding whether to move to a specific state or area.
“All those things – roads, workforce, schools, parks, etc. – are affected by a lot of things governments do and spend on,” Auxier said.
Auxier said some independent state tax commissions use rankings like the ones reported by WalletHub to boost their argument for cutting income taxes or corporate taxes.
Enterprise Florida communications director Nathan Edwards feels that Florida’s low state tax burden and lack of government interference in spending decisions have benefits for the state’s residents and businesses.
“Business dollars go a lot farther in Florida given the state’s tax advantages, tax exemptions and no state personal income tax,” Edwards said. “Businesses and citizens know how to spend their money better than government. Florida’s leaders recognize this and keep government out of the way.”