If Florida modernized its tax code, it would generate millions in new revenue | Opinion

State economists just updated their projections for Florida’s revenue shortfall. As predicted, the news isn’t good: Our state is facing a $5.4 billion shortfall over the next two years.

To put this in perspective, that’s more than the annual budget for the state’s university system.

The projected $5.4 billion revenue decrease spans two years and, currently, the Treasury has made clear that states cannot use federal CARES Act aid to fill in revenue shortfalls. In addition, these COVID-19 relief dollars must be spent by Dec. 30, which does nothing for next year’s loss. While state leaders should beat the drum for more flexibility in CARES Act funds and additional federal dollars, we can’t stake Florida’s future solely on emergency aid. Making its tax code more equitable would make revenues more predictable and sustainable; it would help preserve hard-won budget priorities like teacher raises, investments in environmental conservation and funding for affordable housing.

In addition to lobbying our congressional delegation for more federal aid, state leaders should take the following actions to modernize Florida’s tax laws and ensure that all Floridians are included in the Sunshine State’s economic recovery:

1. Eliminate revenue-losing business subsidies. This year Florida is spending about $21 billion on tax expenditures in the form of subsidies and tax breaks. But unlike the state budget, where appropriations go through an annual legislative review, spending through the tax code remains largely unexamined. These “tax expenditures” reduce the amount of revenue collected through Florida’s tax system.

Enacting automatic sunsets and regularly evaluating tax expenditures would ensure that this foregone revenue is serving a legitimate public purpose.

2. Close corporate tax loopholes. Corporations are not paying their share in the state. Unlike 27 other states and Washington, D.C., Florida does not require combined reporting, which applies a formula to the total domestic business of a company to determine how much income a company should attribute to the state. Instead, Florida allows companies to decide how to allocate their profits, which incentivizes shifting money to low-tax jurisdictions. The nonprofit Institute on Taxation and Economic Policy recently estimated that closing this loophole would bring in $477 million in revenue.

3. Enforce sales tax collection for online sales. In 2018, the U.S. Supreme Court ruled that states can actively collect sales tax for online sales even if the seller has no physical location within the state. If Florida collected internet sales tax, it would help level the playing field between brick-and-mortar businesses and online retailers and generate between $300 million and $500 million each year in revenue.

We strongly urge Gov. DeSantis and state legislative leaders to support these reforms. The well-being of our families, small businesses and communities hang in the balance and the fate of Florida’s budget should not hinge on congressional action. Raising state revenue and creating a more equitable tax structure is the right policy choice for Florida.

Sadaf Knight is CEO of the Florida Policy Institute.