Scott proposes reducing corporate tax rate

Gov. Rick Scott tackled one of his key campaign promises in his first budget proposal released Feb. 7, 2011: Eliminate the corporate income tax.

He didn't propose full immediate elimination – in his 7-7-7 plan to create 700,000 new jobs, he gave himself seven years to do that – but he proposed making a dent.

From his Feb. 7 speech in Eustis announcing his budget: 

"This 'jobs budget' will reduce the business tax from 5.5 percent to 3 percent, completely phasing it out by 2018. And we will cut property taxes by $1.4 billion over the two-year term. Together we will cut taxes by over $4 billion over two years. Critics have said we can't afford to cut taxes now. They repeat the same misguided claims we hear in Washington. I say they are wrong. I say we must cut taxes now.

"Things cannot improve until we have more private sector jobs. We will capture more jobs if other states have a business tax that Florida does not have. We are competing with 49 other states and many countries for entrepreneurs who start, grow and move companies based on where they can get the best return. Cutting taxes is essential to economic prosperity. We will be the best place in the world to live, work and play."

Scott posted his new budget on the website www.letsgettowork.net, which has a page on reducing the corporate income tax rate. That page shows that in 2011-12, he wants to reduce the rate from 5.5 percent to 3 percent, then 2.5 percent in 2012-13 and 2 percent in 2013-14 -- the last year listed in the chart.

Florida's corporate income tax is already low. According to the 2010 Florida Tax Handbook, all the states and the District of Columbia impose some form of corporate income or franchise tax, except for Nevada, South Dakota, Washington (state) and Wyoming. Most are flat rates, ranging from 4.63 percent to 9.99 percent. Sixteen states use graduated rates, between 1.0 and 9.99 percent. Iowa goes up to a 12 percent maximum rate.

You can see how Florida compares in this chart from the Tax Foundation, which calls itself a nonpartisan educational organization. The Federation of Tax Administrators, which serves the states' tax collection agencies, has its own chart.

According to the website of the Florida Department of Revenue and the state's chief economist Amy Baker, most corporations or entities that earn income in the state have to file, even if no tax is due. Even out-of-state firms must file for the portion of their revenue earned here.

Renee Watters, spokesperson for the revenue department, sent us a link to the 2010 Florida Tax Handbook from the state's Office of Economic and Demographic Research based on the December 2009 revenue estimating conference. The handbook shows that since 2004-05, the net collections (minus refunds) have ranged from about $1.4 billion to $2.2 billion. For 2010-11, the most recent (December 2010) estimated collection is almost $2 billion -- or about 9 percent of the state's general fund. The corporate tax goes into the state's general fund that pays for a variety of programs including education and human services.

Scott promised to phase out the corporate tax rate over seven years. His first annual budget proposal reduces the corporate tax rate from 5.5 percent to 3 percent for 2011-12 and ultimately down to 2 percent by 2013-14. The state Legislature will likely wrestle with such a tax cut amid a budget shortfall already projected to be more than $3 billion. But for now, we rate this promise In the Works.