Spending

Florida tax code spending deserves closer scrutiny

In the aftermath of Hurricanes Ian and Nicole, with American Rescue Plan Act dollars dwindling, lawmakers will have to decide how to fund increased spending on Florida’s natural resources, community climate resilience and disaster planning. disaster recovery.

To do this, consider that Florida spent $23.6 billion last year, equivalent to almost a quarter of our state budget, without lawmakers having to convene a single legislative committee, to hold a public forum or seek approval. In fact, the state has spent at least $18 billion every year since 2010 and will likely continue to spend that much in years to come, with virtually no oversight.

How is it possible? Through over 400 tax expenditures – deductions, credits and other special tax benefits to encourage specific behavior or provide hardship relief on behalf of the public interest. In exchange, Florida loses its revenue. For every dollar of tax revenue, the state provides a subsidy of about 29 cents. While there’s nothing inherently good or bad about using the tax code to shape public policy, this significant loss of revenue warrants – at the very least – closer scrutiny.

Silent spending, in the form of tax credits, deductions and exemptions, occurs year after year through the tax code, increasing at a rate of 2% per year. Once enacted, tax expenditures receive little or no attention, have unlimited price tags, and remain in place until steps are taken to reform them.

It’s important to put the last number into perspective. The $23.6 billion in revenue Florida ceded in the past fiscal year exceeds the respective state budgets of West Virginia, Delaware, Oklahoma, Mississippi and 16 other states. That’s enough to help nearly 2.6 million families pay for a year of child care or cover a year’s electric bill for every household in the Sunshine State. That’s enough money to harden buildings and beaches in South Florida against climate change.

In short, silent spending costs a significant amount of revenue each year – so much so that policymakers should ask a central and essential question: Does sacrificing billions each year in tax expenditures lead to more desirable outcomes? socially than investing those dollars in high-quality spending? public schools, safe and affordable housing, reliable transportation infrastructure, climate resilience and other public services?

While some tax expenditures, such as sales tax exemptions for groceries and drugs, play an important role in helping individuals and families, there are expenditures in the tax code whose public purpose remains unclear. . For example, the state offers:

  • a corporate tax deduction for international banking facilities;
  • sales tax exemptions for boat purchases over $18,000 and repairs over $60,000; and
  • a sales tax exemption for subscriptions to newspapers, newsletters and magazines delivered by mail.

This is in addition to new spending approved by lawmakers in the 2022 session, including sales tax exemptions for admissions to Daytona 500 races, the Formula 1 Grand Prix and World Cup football games. world. Together, those expenses cost Floridians $84 million — enough to fully match the Florida Disaster Fund, which stands at $50 million as of Oct. 24.

Clearly, the opportunity costs of silent spending are real. Tax code spending should receive the same level of scrutiny as budget discussions.

The resources are there to help our state prepare for the next disaster, whether it’s a hurricane or an economic downturn. It’s just about prioritizing resilience and accountability.

Esteban Leonardo Santis, Ph.D., is a policy analyst focused on fiscal and tax issues at the nonpartisan organization Florida Institute of Politics. He is the author of the recent report “Silent Spending: Florida’s Shadow Budget Needs Further Examination (2022)