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In Florida, 99% of companies pay no corporate income tax — with lawmakers’ blessing
ORLANDO, Fla. — EBay Inc., the online auction company with 180 million buyers around the world, earned $34 million of profit in Florida in 2014, according to state auditors.
At Florida’s official corporate income tax rate of 5.5 percent, eBay should have paid more than $1.8 million in state taxes — enough money to hire 40 new teachers.
But records show eBay actually paid $18,810 — not even enough to hire one.
It’s not an isolated example. Auditors say Sanofi Pasteur Inc., one of the world’s largest vaccine manufacturers, earned an estimated $55 million of profits in Florida between 2008 and 2013 — yet it didn’t pay a dime in state income tax over that same period.
In recent years, Mastercard Inc. saved more than $20 million in Florida income taxes by claiming that none of its sales occur in Florida. Verizon Wireless saved more than $23 million by passing hundreds of millions of dollars of profits out of the state. And HCA Healthcare Inc. saved more than $28 million in large part by moving money through a maze of subsidiaries.
All of these moves are made possible by two things: Aggressive tax-avoidance tactics by big businesses — and elected leaders who choose not to stop them.
The combination has left Florida with what national experts say is one of the easiest-to-avoid corporate income taxes in the nation. An estimated 99% of all businesses in Florida no longer pay any corporate income tax at all.
“The Florida corporate income tax leaks like a sieve,” said Richard Pomp, a law professor at the University of Connecticut and a leading authority on state taxes. “Business has it pretty much the way they want it.”
Companies that benefit under the tax structure say it is good for Florida.
“We believe Florida has adopted a system that incentivizes business activity in the state, which results in increased jobs and economic activity, which generates tax revenue for the state,” said Nicolas Kressmann, a spokesman for the French pharmaceutical giant Sanofi S.A., the parent company of vaccine-maker Sanofi Pasteur.
Florida corporate tax returns are confidential by state law, and companies rarely reveal much information about their state taxes. But the Orlando Sentinel gathered records from a decade’s worth of tax disputes between corporate taxpayers and the Florida Department of Revenue that reveal typically secret details about tax payments and tax-planning strategies.
The companies come from across the economy, including the manufacturers of Budweiser beer and Dr. Pepper soda, the owners of Circle K convenience stores and Whole Foods grocery stores, a major distributor of opioids, a national drug-testing company, and an investment firm that is buying part of the parent company of Legoland Florida. Virtually all of the disputes were settled — often for a small fraction of the taxes that the Department of Revenue said the companies owed.
Compiled from more than two dozen cases in all, the litigation records offer a glimpse at how companies have found ways to ensure much of their Florida profits are lightly taxed, if they are taxed at all. Some companies wall profits off in entities that were designed to help small firms. Others argue over the definition of words like “business” or “this.” Many pay themselves to use their own names.
No amount of tax savings is too small. The records show that the hospital company HCA, which does nearly $50 billion in annual revenue, once trimmed an extra $110,000 from its Florida tax bill by using a Hurricane Katrina recovery program to create Florida tax savings based on jobs the company had at facilities in Louisiana, Texas, Mississippi and Alabama.
Florida’s elected leaders have repeatedly rejected changes that could stop these tactics. They have also chosen to let loopholes remain in place even after they have been flagged by legislative staffers, auditors and judges. And they have cut back their own enforcement ability: The number of auditors at the Florida Department of Revenue has been cut by roughly 30% over the past 25 years, according to agency records.
“The state of Florida has made a choice,” said David Brunori, a senior director at accounting firm RSM. “They make it very easy — or they don’t make it very hard — to minimize their corporate income tax.”
Other states have made different choices. Many have rewritten or updated their corporate tax laws to curb some of the same tax-avoidance techniques happening in Florida.
Florida Senate President Bill Galvano, a Republican from Bradenton who has been a member of the Legislature for 15 years, said he thinks low taxes have contributed to Florida’s economic growth. But he also said he has concerns about allowing some businesses to engage in “a shell game” to avoid the corporate income tax.
“You raised some good issues and put some examples out there of companies that seem to be making tremendous profits here in the state of Florida and in some cases not paying any corporate income tax,” Galvano said. “I’m interested in understanding how that works and why that is — and is it to the detriment of other businesses that maybe don’t have the ability to take advantage of the same statutory framework that these companies do.”
There’s no way to say exactly how much companies save, and Florida loses, through corporate tax avoidance. But estimates of some of the changes Florida lawmakers could make — such as making it more difficult for companies to cut their tax bills by paying themselves for things — show they could raise more than $1 billion annually. That’s potentially enough to double state funding for pre-kindergarten, provide Medicaid coverage to every special-needs family currently waiting for help, and eliminate the state tax Floridians pay for their driver’s licenses.
Florida’s biggest businesses lobby hard against any changes that might compel them to pay more tax, arguing that every dollar the state collects from them is a dollar that they cannot invest themselves. They also spend millions to help elect politicians who agree: Records show the state’s two largest business-lobbying groups — Associated Industries of Florida and the Florida Chamber of Commerce — spent more than $30 million on Florida elections during the 2018 campaign.
Associated Industries — whose donors include Comcast Corp., HCA and Duke Energy Corp. — says it opposes “any structural changes” to the state corporate income tax. The lobbying group also says it is against efforts to address “any other ‘loophole’ issues.”
“Corporate lobbyists run Tallahassee,” said state Sen. Jose Javier Rodriguez, a Democrat from Miami who has tried and failed to pass legislation that would make it harder for companies to avoid Florida’s corporate income tax. “They work so hard to keep this off the agenda because they know the public would be outraged if they understood what it is that they are doing.”
Florida Gov. Ron DeSantis, who has raised more than $400,000 from the Chamber and AIF over the past two years, declined to be interviewed for this story.
“Gov. DeSantis has made clear that, under his administration, Florida will continue to build its economic momentum by maintaining a low-tax business climate,” a spokeswoman for the governor said in a written statement.
Businesses tilt the tax playing field in their favor in other ways. They fund think tanks like Florida TaxWatch, which advocates against some of the same corporate-tax changes that the businesses themselves oppose. TaxWatch is run by an executive committee that includes representatives from Verizon Communications Inc., Publix Super Markets Inc. and Florida Power & Light. (The Orlando Sentinel and the Sun-Sentinel in South Florida, both of which are owned by Tribune Publishing, contribute annually to TaxWatch.)
And they hire former insiders who can help them find and preserve soft spots in the tax code. One of the top tax lobbyists in Tallahassee — H. French Brown IV, an attorney at the law firm Dean Mead, whose clients include Walt Disney Co., Charter Communications Inc. and the Florida Chamber of Commerce — is a former senior attorney and deputy director at the Florida Department of Revenue.
Whether a porous corporate income tax is good for Florida depends upon whom you ask. Partly because it gives companies more freedom to plan away their taxes, Florida has the fourth-best tax structure in the country for businesses, according to the Tax Foundation, a Washington-based think tank whose board of directors includes executives at Microsoft Corp. and PepsiCo Inc.
But partly because of those same friendly rules for corporations, Florida also has the third-most regressive tax structure in the nation, according to the Institute on Taxation and Economic Policy, another Washington think tank whose board of directors includes an executive with the American Federation of State, County and Municipal Employees.
Excluding elderly taxpayers, the bottom 20% of Florida families — those earning less than $18,700 a year — pay 12.7% of their income in state and local taxes, according to ITEP.
The top 1% of families — those earning more than $548,700 a year — pay 2.3 percent.
(EDITORS: STORY CAN END HERE)
Gabriel Zucman, an economist at the University of California, Berkeley, says the corporate income tax is one of the most powerful tools governments have to ensure that the wealthiest people in society contribute more to the funding of public programs. That’s because the truly rich derive most of their wealth from the ownership of corporations.
The corporate income tax “is like a minimum tax on the very rich,” said Zucman, who advocates for higher corporate taxes. “It makes sure that shareholders pay taxes, even when companies don’t distribute dividends.”
The less money Florida collects through its corporate income tax, the more dependent the state becomes on other sources — like sales tax and aid from the federal government. Florida today raises roughly three times as much revenue selling lottery tickets as it does taxing corporate profits.
A leaky corporate income tax ultimately shifts more of the cost of Florida government from corporations onto others, including low- and middle-income families, said Matt Gardner, a senior fellow at ITEP.
“Every million dollars you’re not collecting that way is a million dollars that local governments are trying to collect through speed traps or dog-catcher fees,” Gardner said. “You don’t see the linkage. But it’s there.”
———
©2019 The Orlando Sentinel (Orlando, Fla.)
Visit The Orlando Sentinel (Orlando, Fla.) at www.OrlandoSentinel.com
Distributed by Tribune Content Agency, LLC.
In Florida, 99% of companies pay no corporate income tax — with lawmakers’ blessing
- By Jason Garcia Orlando Sentinel (TNS)
- 1 hr ago
ORLANDO, Fla. — EBay Inc., the online auction company with 180 million buyers around the world, earned $34 million of profit in Florida in 2014, according to state auditors.
At Florida’s official corporate income tax rate of 5.5 percent, eBay should have paid more than $1.8 million in state taxes — enough money to hire 40 new teachers.
But records show eBay actually paid $18,810 — not even enough to hire one.
It’s not an isolated example. Auditors say Sanofi Pasteur Inc., one of the world’s largest vaccine manufacturers, earned an estimated $55 million of profits in Florida between 2008 and 2013 — yet it didn’t pay a dime in state income tax over that same period.
In recent years, Mastercard Inc. saved more than $20 million in Florida income taxes by claiming that none of its sales occur in Florida. Verizon Wireless saved more than $23 million by passing hundreds of millions of dollars of profits out of the state. And HCA Healthcare Inc. saved more than $28 million in large part by moving money through a maze of subsidiaries.
All of these moves are made possible by two things: Aggressive tax-avoidance tactics by big businesses — and elected leaders who choose not to stop them.
The combination has left Florida with what national experts say is one of the easiest-to-avoid corporate income taxes in the nation. An estimated 99% of all businesses in Florida no longer pay any corporate income tax at all.
“The Florida corporate income tax leaks like a sieve,” said Richard Pomp, a law professor at the University of Connecticut and a leading authority on state taxes. “Business has it pretty much the way they want it.”
Companies that benefit under the tax structure say it is good for Florida.
“We believe Florida has adopted a system that incentivizes business activity in the state, which results in increased jobs and economic activity, which generates tax revenue for the state,” said Nicolas Kressmann, a spokesman for the French pharmaceutical giant Sanofi S.A., the parent company of vaccine-maker Sanofi Pasteur.
Florida corporate tax returns are confidential by state law, and companies rarely reveal much information about their state taxes. But the Orlando Sentinel gathered records from a decade’s worth of tax disputes between corporate taxpayers and the Florida Department of Revenue that reveal typically secret details about tax payments and tax-planning strategies.
The companies come from across the economy, including the manufacturers of Budweiser beer and Dr. Pepper soda, the owners of Circle K convenience stores and Whole Foods grocery stores, a major distributor of opioids, a national drug-testing company, and an investment firm that is buying part of the parent company of Legoland Florida. Virtually all of the disputes were settled — often for a small fraction of the taxes that the Department of Revenue said the companies owed.
Compiled from more than two dozen cases in all, the litigation records offer a glimpse at how companies have found ways to ensure much of their Florida profits are lightly taxed, if they are taxed at all. Some companies wall profits off in entities that were designed to help small firms. Others argue over the definition of words like “business” or “this.” Many pay themselves to use their own names.
No amount of tax savings is too small. The records show that the hospital company HCA, which does nearly $50 billion in annual revenue, once trimmed an extra $110,000 from its Florida tax bill by using a Hurricane Katrina recovery program to create Florida tax savings based on jobs the company had at facilities in Louisiana, Texas, Mississippi and Alabama.
Florida’s elected leaders have repeatedly rejected changes that could stop these tactics. They have also chosen to let loopholes remain in place even after they have been flagged by legislative staffers, auditors and judges. And they have cut back their own enforcement ability: The number of auditors at the Florida Department of Revenue has been cut by roughly 30% over the past 25 years, according to agency records.
“The state of Florida has made a choice,” said David Brunori, a senior director at accounting firm RSM. “They make it very easy — or they don’t make it very hard — to minimize their corporate income tax.”
Other states have made different choices. Many have rewritten or updated their corporate tax laws to curb some of the same tax-avoidance techniques happening in Florida.
Florida Senate President Bill Galvano, a Republican from Bradenton who has been a member of the Legislature for 15 years, said he thinks low taxes have contributed to Florida’s economic growth. But he also said he has concerns about allowing some businesses to engage in “a shell game” to avoid the corporate income tax.
“You raised some good issues and put some examples out there of companies that seem to be making tremendous profits here in the state of Florida and in some cases not paying any corporate income tax,” Galvano said. “I’m interested in understanding how that works and why that is — and is it to the detriment of other businesses that maybe don’t have the ability to take advantage of the same statutory framework that these companies do.”
There’s no way to say exactly how much companies save, and Florida loses, through corporate tax avoidance. But estimates of some of the changes Florida lawmakers could make — such as making it more difficult for companies to cut their tax bills by paying themselves for things — show they could raise more than $1 billion annually. That’s potentially enough to double state funding for pre-kindergarten, provide Medicaid coverage to every special-needs family currently waiting for help, and eliminate the state tax Floridians pay for their driver’s licenses.
Florida’s biggest businesses lobby hard against any changes that might compel them to pay more tax, arguing that every dollar the state collects from them is a dollar that they cannot invest themselves. They also spend millions to help elect politicians who agree: Records show the state’s two largest business-lobbying groups — Associated Industries of Florida and the Florida Chamber of Commerce — spent more than $30 million on Florida elections during the 2018 campaign.
Associated Industries — whose donors include Comcast Corp., HCA and Duke Energy Corp. — says it opposes “any structural changes” to the state corporate income tax. The lobbying group also says it is against efforts to address “any other ‘loophole’ issues.”
“Corporate lobbyists run Tallahassee,” said state Sen. Jose Javier Rodriguez, a Democrat from Miami who has tried and failed to pass legislation that would make it harder for companies to avoid Florida’s corporate income tax. “They work so hard to keep this off the agenda because they know the public would be outraged if they understood what it is that they are doing.”
Florida Gov. Ron DeSantis, who has raised more than $400,000 from the Chamber and AIF over the past two years, declined to be interviewed for this story.
“Gov. DeSantis has made clear that, under his administration, Florida will continue to build its economic momentum by maintaining a low-tax business climate,” a spokeswoman for the governor said in a written statement.
Businesses tilt the tax playing field in their favor in other ways. They fund think tanks like Florida TaxWatch, which advocates against some of the same corporate-tax changes that the businesses themselves oppose. TaxWatch is run by an executive committee that includes representatives from Verizon Communications Inc., Publix Super Markets Inc. and Florida Power & Light. (The Orlando Sentinel and the Sun-Sentinel in South Florida, both of which are owned by Tribune Publishing, contribute annually to TaxWatch.)
And they hire former insiders who can help them find and preserve soft spots in the tax code. One of the top tax lobbyists in Tallahassee — H. French Brown IV, an attorney at the law firm Dean Mead, whose clients include Walt Disney Co., Charter Communications Inc. and the Florida Chamber of Commerce — is a former senior attorney and deputy director at the Florida Department of Revenue.
Whether a porous corporate income tax is good for Florida depends upon whom you ask. Partly because it gives companies more freedom to plan away their taxes, Florida has the fourth-best tax structure in the country for businesses, according to the Tax Foundation, a Washington-based think tank whose board of directors includes executives at Microsoft Corp. and PepsiCo Inc.
But partly because of those same friendly rules for corporations, Florida also has the third-most regressive tax structure in the nation, according to the Institute on Taxation and Economic Policy, another Washington think tank whose board of directors includes an executive with the American Federation of State, County and Municipal Employees.
Excluding elderly taxpayers, the bottom 20% of Florida families — those earning less than $18,700 a year — pay 12.7% of their income in state and local taxes, according to ITEP.
The top 1% of families — those earning more than $548,700 a year — pay 2.3 percent.
(EDITORS: STORY CAN END HERE)
Gabriel Zucman, an economist at the University of California, Berkeley, says the corporate income tax is one of the most powerful tools governments have to ensure that the wealthiest people in society contribute more to the funding of public programs. That’s because the truly rich derive most of their wealth from the ownership of corporations.
The corporate income tax “is like a minimum tax on the very rich,” said Zucman, who advocates for higher corporate taxes. “It makes sure that shareholders pay taxes, even when companies don’t distribute dividends.”
The less money Florida collects through its corporate income tax, the more dependent the state becomes on other sources — like sales tax and aid from the federal government. Florida today raises roughly three times as much revenue selling lottery tickets as it does taxing corporate profits.
A leaky corporate income tax ultimately shifts more of the cost of Florida government from corporations onto others, including low- and middle-income families, said Matt Gardner, a senior fellow at ITEP.
“Every million dollars you’re not collecting that way is a million dollars that local governments are trying to collect through speed traps or dog-catcher fees,” Gardner said. “You don’t see the linkage. But it’s there.”
———
©2019 The Orlando Sentinel (Orlando, Fla.)
Visit The Orlando Sentinel (Orlando, Fla.) at www.OrlandoSentinel.com
Distributed by Tribune Content Agency, LLC.
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