Tax Cuts And Tax Holidays Would Save Shoppers, Businesses Millions

November 21, 2013

A nearly two-week hurricane preparedness tax holiday, in which sales tax would be lifted on select storm related gear, would save shoppers at least $3.3 million, state economists said Wednesday.

Meanwhile, a separate measure expected to also go before state legislators in 2014, the popular three-day back-to-school sale tax holiday on select clothes, supplies and electronics, would keep about $35.9 million from flowing into state and local government coffers, analysts said.

State economists, sitting as the Revenue Estimating Conference, reviewed the proposed sales tax breaks on Wednesday, along with separate measures to reduce the corporate income, communications-services, and the commercial rental taxes all filed by Senate Finance and Tax Chairwoman Dorothy Hukill, R-Port Orange.

The proposed business tax and fee reductions, along with the sales tax holidays, are just some of the proposals that have come in the wake of Gov. Rick Scott’s request for lawmakers to cut $500 million in fees and taxes.

A big factor in how much of the cuts or tax holidays make it into the next fiscal plan depends in part on the state’s economic outlook that the economists will update prior to the legislative session early next year.

“We will update it and readopt it probably in early January,” Amy Baker, the Legislature’s chief economist, said of the proposed tax cuts. “But you wouldn’t expect the numbers to change.”

The overall budget forecast has lawmakers preparing a fiscal plan with an $845.7 million surplus from the current year. The state’s September revenue report indicates that general tax collections remain 7.2 percent ahead of projections for the current year.

The panel estimated that Hukill’s proposed 2 percent cut in the state’s communications-services tax (SB 266) would reduce state revenue by $255 million, a slight deviation from the lawmaker’s initial estimate of $282 million a year.

The complicated tax affects a number of communications services, with Hukill pointing to examples such as cell phones.

The economists also projected that Hukill’s proposal (SB 176) to reduce a commercial rental tax from 6 percent to 5 percent would cut state revenue about $235.6 million, and local revenue by $20.2 million in its first year. The business savings would grow to around $300 million in revenue reductions for the state and $25.8 million in reduced income for local governments by the 2018 fiscal year.

Hukill had initially estimated that the reduction would cut $250 million a year from state revenue.

Meanwhile, Hukill’s proposal (SB 134) to increase the amount of income exempt from the corporate income tax, from $50,000 to $75,000, would reduce state revenue by about $22 million a year, the economists projected.

The hurricane holiday measure (SB 362) by Sen. Rob Bradley, R-Fleming Island, would lift sales tax on select gear from June 1 to June 12 if approved by the Legislature and signed into law by Scott.

Items that would be free of the sales tax during the period would include: flash lights and other self-powered lights selling for $20 or less; portable self-powered radios, two-way radios, or weather band radios that sell for $50 or less; tarps or other flexible waterproof sheeting that sells for less than $50; first-aid kits that cost under $30; packets of AA, C, D, 6-volt, and 9-volt batteries that sell for under $30; and portable generators worth less than $750.

Baker said the $3.3 million revenue reduction projection may be low.

The projection was difficult because it’s hard to project how many people would actually buy the supplies during the tax break period. Many Floridians already have them around the house as part of hurricane kits.

As for the back to school holiday, the overall $35.9 million projection is up from a $28.3 million hit to the state economy, and $6.4 million impact to local governments from the holiday this past year. Shoppers got more tax savings this past August than in the past due in part to the inclusion for the first time of computers and related accessories under $750 into the discounted items.

Baker said future back-to-school holiday projections should be expected to grow as students become even more tech savvy.

The back-to-school sales tax proposal has yet to be filed as a bill.

House Finance and Tax Chairman Ritch Workman, R-Melbourne, has said he may revive a failed proposal from the 2013 session that would exchange revenue generated from collecting sales taxes on Internet purchases for an extended back-to-school sales tax holiday.

Rather than a three-day tax holiday on clothing and school items, Workman said the number of days would depend on the amount of revenue collected through the tax on Internet purchases. The more money collected, the longer the holiday.

Lawmakers for years have looked at online sales as a possible source of tax revenue – noting that the taxes are supposed to be paid, but aren’t because there’s no enforcement mechanism, particularly with out-of-state sellers.

The economists estimated that if the sales tax holiday were extended to 10 days, the savings would grow to around $51 million.

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Written by William Reynolds · Filed Under News