Governor Crist Calls for a Corporate Tax Cut
With Florida unemployment at a 36-year high, Gov. Charlie Crist on Tuesday called for scaling back the state’s corporate income tax as a means of keeping cash in struggling companies.
Speaking at a pipe manufacturer in Panama City, Crist outlined a plan to reduce the tax rate on businesses with less than $1 million in annual income from 5.5 percent to 4.5 percent.
Crist said the measure is aimed at helping small- to mid-sized Florida businesses – but he acknowledged it will pull $57.4 million from a state budget already facing a $3 billion shortfall.
Crist, though, said the tax cut should serve as a pretty good stimulant.
“That’s the idea,” he said. “That would apply to an awful lot of businesses across the state of Florida.”
Amid the state’s faltering economy, corporate income tax collections have been relatively strong in recent months.
Expected to pull $1.8 billion into the state’s $66 billion budget next year, corporate collections are forecast as topping projections by $70 million. State economists in a recent financial outlook concluded the increase was because “corporate profits remained higher than expected due to the quick business response to the faltering economy.”
The state Revenue Department said about 36,000 Florida businesses would pay less in taxes under the proposal, which effectively boosts a current $25,000 exemption to $1 million.
“It’s an important step to put more money back into the private sector economy,” said Bill Herrle of the National Federation of Independent Business.
In other portions of his budget, Crist recommended continuing to steer $3.8 million toward small- and start-up businesses; $3 million to the existing “economic gardening” program for small companies looking to expand; and tripling state funding for affordable housing, providing $93.4 million to provide rental units and first-time homebuyer downpayments.
Barney Bishop, president of Associated Industries of Florida, whose organization represents larger companies likely unaffected by the proposed tax break, shrugged at the proposal, saying it’s not likely to do much for the state’s economy – but creates another troubling budget hole.
“You wonder what the Legislature is going to do to make up the difference,” Bishop said. “We didn’t advocate for a cut in the corporate rate, and I’m skeptical. The real problem businesses are facing is a lack of access to capital.”
Crist’s bid to reduce the corporate income tax comes just days after the Republican governor joined with legislative leaders to pledge support for another demand by state business groups: revamping the unemployment compensation tax.
Notices to businesses that they were in line for as much as a 12-fold increase in their unemployment tax payments were sent in December.
With unemployment now at 11.8 percent in Florida and expected to climb, Crist and Senate President Jeff Atwater and House Speaker Larry Cretul pledged to take action to ease the burden on businesses of that tax hike, which is designed to replenish the state’s drained unemployment compensation trust fund. The governor Tuesday echoed his commitment to easing the impact of the tax early in the upcoming legislative session.
Although Crist and lawmakers did not announce a consensus, an emerging plan would allow employers to spread their unemployment compensation payments over the upcoming year – rather than facing a one-time annual payment in the spring.
The proposal being discussed by leading lawmakers and business groups also reduces employees’ taxable wages from $8,500 to $7,000 for the next two years – reversing an increase approved last spring with the support of the same business organizations now clamoring for relief.
The Florida Retail Federation, state Chamber of Commerce and other groups are also urging that lawmakers appeal to the federal government for help in easing interest payments on an almost $1 billion debt so far accumulated by the state to maintain payments to the eligible portion of Florida’s 1.1 million unemployed.
Democratic Rep. Ron Saunders of Key West said his party’s priority this legislative session is “jobs, jobs, jobs.
“We’ll take a look at the corporate income tax cut,” he said. “But we want to make sure that we’re not just giving big business a tax break, but that it will correlate with job creation.”
Saunders also acknowledged the irony of business groups – frequently critical of federal stimulus spending – now worried that Washington will demand payment from Florida on unemployment compensation.
“You can’t say there are good federal dollars and bad federal dollars,” Saunders said.