The business rent tax is the only state-sanctioned sales tax on commercial leases in the entire country and Florida is the not-so-proud holder of that title. Not even tax-happy havens like California and New York impose this state tax on its businesses. Due to this burdensome tax, Florida businesses shell out more than $1.7 billion every year to the state. As a result, our state economy dramatically suffers in the form of suppressed job growth and economic activity.
Luckily, Gov. Rick Scott is committed to cutting this tax on hardworking small-business owners and budding entrepreneurs. The governor has repeatedly made cutting or abolishing this tax one of his top priorities for numerous years as part of his commitment to creating jobs for Florida families. Recently, he has hit the road advocating for a 25 percent cut in the tax – a move that could save Florida businesses more than $400 million per year and reduce prices for Florida consumers.
The business rent tax places a disproportionate burden on small businesses and startups that do not have the capital to purchase bigger office space, hire new employees or expand to other locations. All of this creates a chilling effect on many of Florida’s more than 2 million small businesses.
Since businesses must pay a 6 percent state sales tax on their rent, including added costs to that lease – such as property taxes, maintenance and the cost of insurance – and local governments can add an additional 1.5 percent, your local retailer could be easily paying more than $100,000 yearly in taxes on their lease alone. Those costs are ultimately passed down to consumers in the form of higher prices. Floridians still trying to recover from the Great Recession cannot continue to afford these cost increases.
The business rent tax undoubtedly puts Florida at a distinct competitive disadvantage, one that is not shared by any other state in the country. It gives the impression that we are closed for business and makes our competitor states look more attractive. It doesn’t make sense for a company to move to Florida if they can get similar benefits in another state without paying a burdensome tax on their rent.
Florida TaxWatch’s research has shown that this rent tax presents an impediment to the success of the state’s businesses, and TaxWatch’s long-standing recommendation has been that Florida’s policymakers should take efforts toward reducing or eliminating this tax.
Unfortunately, despite the support of many lawmakers in the Legislature, this common-sense tax reform has repeatedly languished in the halls of the Capitol. Despite a tighter budget outlook this session, there is still enough money to consider a reduction in the business rent tax.
The fairness and competitiveness of our tax structure is paramount to Florida’s continued success. If we want to continue to be recognized as the top place in the country for business, we must promote incentive programs like Enterprise Florida and commit to reduce or eliminate the business rent tax. This is the one area where Florida cannot afford to be unique.
Pat Neal is a former state senator and former chair of the Christian Coalition of Florida. He currently serves as chairman-elect for the board of directors of Florida TaxWatch, the state’s independent, nonpartisan, nonprofit research institute and government watchdog, and is the president of Neal Communities.