Business Taxation in Florida: A Growing Threat to Competitiveness? Stephen O. Morrell, Ph.D. Senior Research Fellow Florida TaxWatch Professor of Economics and Finance Andreas School of Business Barry University Miami Shores, Florida

State and Local Taxes on Business Finance Beneficial Public Services. May Divert Scarce Resources from Higher to Lower Value-Added Uses. May Increase the Cost of Providing Goods and Services. May Diminish Incentives for Productivity Enhancing, Job Creating and Income Boosting Investments. Variations Across States May Affect Business Location and Expansion Decisions.

The Council on State Taxation (COST) – Ernst & Young Study Robert Cline, Tom Neubig, and Andrew Phillips. “Total State and Local Business Taxes: 50 State Estimates for Fiscal Year 2006.” February, Detailed State-by-State Estimates of State and Local Taxes Paid by Business. Analysis of Ten Types of Taxes State and Local Governments Impose on Businesses. Insights About Tax Burdens and Competitiveness.

A Growing Burden on Business State & Local Taxes in the U.S. FY 2002 FY2006 % Change Total Taxes$911B $1.235B 35.6 Total Non-Business $515 B $680 B 32.0 Total Business $396B $554B 39.7 Business Share of Total 43.5% 44.9% MRG = 49% Private Sector GSP 4.5% 5.1% Source: Adapted from Table 5, “Total State and Local Business Taxes.” COST and E&Y. February, 2007.

A Growing Burden on Business State and Local Taxes in Florida FY 2002FY 2006% Change Total Taxes $44.4B $67 B 51% Total Non Business $23.8B $35B 47% Total Business $20.6B $32B 55% Business Share of Total 46% 48% MRG = 50% Private Sector GSP 5.1% 5.4% Source: Adapted from Tables 5 and 6, “Total State and Local Business Taxes.” COST and E&Y. February, 2007.

Primary Types of State and Local Business Taxes Source: Adapted from Figure 3, “Total State and Local Business Taxes.” COST and E&Y. February, 2007.

Distribution of Local and Business Taxes in Florida Chart

Business Tax Burdens, FY 2006: Florida, U.S. and ‘Sun Belt’ States Tax Measure Florida U.S. Sun Belt Share of State Taxes 42.30% 39.90% 40.43%* Share of Local Taxes 56.50% 52.20% 59.10%* Share of State & Local 47.80% 44.90% 47.41%* Private Sector GSP 5.40% 5.10% 4.82%* Sun Belt States: Al., Ga., La., Ms., NC., SC., TN., TX., Va. Source: Adapted from Table 5, “Total State and Local Business Taxes.” Cost and E&Y. February, * Without La. And TX %; 56.10%; 44.91%; 4.52%.

Conclusions State and local taxes on businesses can support as well as impair the nation and Florida’s economies, especially in an environment of intense global competition and highly mobile resources. Tax burdens on businesses nationally as well as in Florida have risen sharply in recent years. Florida’s business tax burdens have risen to levels where they may be a threat to the state’s competitiveness. Policymakers at the state and local levels need to be aware of this threat.