The state Legislature passed and placed on the ballot a measure to authorize the levy of a state corporate income tax (CIT). Florida voters overwhelmingly approved the amendment, and, in 1972, the state began collecting a 5 percent CIT. Before passage of the CIT, policymakers anticipated a multi-million-dollar deficit due to increased public school aid following a series of local property tax reductions. The CIT was one strategy to help schools, as well as counties and cities, through progressive taxation, i.e., ensuring wealthy corporations who earned more, paid more CITs than Floridians with low to moderate wages. Reports show that following the passage of Florida’s corporate income tax, it slowly moved to displace all other revenue sources, except the general sales tax, to become Florida’s second-most important source of money (responsible for about 10 percent of all discretionary tax revenue in the state).
Florida’s CIT, which is set at 5.5 percent, is the state’s most significant non-regressive revenue source and a tool for reducing resource inequalities. Taxes like the CIT help the state and local governments pay for crucial public schools, safe neighborhoods, roads, veterans’ services, health care, pristine water, and clean parks. These public goods are vital to the prosperity and well-being of Floridians and Florida-based businesses. A recent report shows that businesses recover between 56 to 77 percent of the taxes they pay as they benefit from quality public goods.
Contrary to the theory that business taxes dampen economic activity, “since World War II, productivity and wage growth in the U.S. economy has been significantly greater in periods with higher corporate tax rates.” As the Center on Budget and Policy Priorities adds, this “doesn’t mean that higher corporate tax rates caused the wage growth, but it is strong evidence that tax rates didn’t unduly impede wage growth.” In short, business taxes, including the CIT, help strengthen public services, which benefit Floridians and businesses. These taxes do not obstruct economic activity.