COVID-19 highlights a particular vulnerability for Florida: Its regressive tax system

Florida's dependence on consumption taxes to run state and local government is causing problems during the COVID-19 pandemic. Photo by Miami Convention & Visitors Bureau

One of the lures that attracted tens of millions of newcomers to Florida since World War II — other than the beaches, warm weather, and all that — is its status as a low-tax haven. Especially its lack of a state income tax and moderate property taxes.

That’s hurting us as the state makes its first move — a “baby step,” as Gov. Ron DeSantis puts it — toward recovery from COVID-19 and the economic depression that has put millions of people out of work.

The lack of a broad, progressive revenue stream like an income tax leaves state and local governments here to rely heavily on regressive consumption taxes: sales taxes, to name one example, account for 83.8 percent of Florida’s state tax collections (the national average is 47.7 percent).

But social distancing strategies adopted as a late attempt to mitigate COVID’s spread have decimated retail shops, tourist attractions, bars, restaurants, movie theaters, and more, leaving too many Floridians jobless.

As of May 10, the state Department of Economic Opportunity had fielded more than 1.8 million claims for unemployment compensation, and many people working in the emerging gig economy don’t even qualify.

Never mind the hit to the tourism sector, which in better times accounted for close to $90 billion of Florida’s economy and 1.5 million jobs — and $11.5 billion in state and local taxes.

Gov. Ron DeSantis acknowledged that vulnerability this week during a news conference in Fort Myers. He’s been trying to sell optimism during a recent string of appearances at medical centers around the state, most recently Monday at Fort Myers’ Gulf Coast Medical Center.

But Florida’s financial picture is taking a hit.

“Some of these revenues are driven by things like tourism, and that, obviously, has taken a hit. And that’s really not going to be about whether government says you can do it or not as much as it’s going to be about public confidence,” DeSantis conceded.

It’s still too soon to call the Legislature into session to sort out the mess, the Republican governor said eight weeks before the new fiscal year begins on July 1.

“But I think, obviously, looking at next year’s budget, it’s really going to be determined on what we’re looking at in terms of economic recovery — but then also depending on what kind of financial assistance that we get.”

DeSantis had already made clear that he won’t sign the Legislature’s $93.2 billion state budget for the fiscal year that begins on July 1 until he knows more — and signaled that he’ll apply his line-item veto power ruthlessly against that document.

“So, we’ll look at all that and see. And then once I get a sense of what’s going to happen in D.C. — they’re going to do something, I think, for states this week. Then I’ll have to look at the budget and make those decisions at that time,” he said.

“It wouldn’t have been appropriate for me to have signed a budget knowing that we were going to have these uncharted waters. Now that we’re in uncharted waters, I should see what are all my tools to deal with it.”

Florida’s economy had been healthy before the pandemic, he added.

But a Moody’s analysis in mid-April projected the fiscal hit to the state at between $8.1 billion and $10 billion, depending on when the economy begins to recover and how well.

That means less money to pay for everything from road and environmental projects to public school expenses and state employee pay.

During the last major downturn, the Great Recession, state and local jobs in Florida contracted by more than 4.4 percent.

Democrats in the state House and Senate have been pressing for a special session to address the overwhelming demand that crashed Florida’s unemployment compensation website, provisions to safeguard the vote in the General Election this fall, and to expand Medicaid.

However, those chambers’ Republican majorities nixed the idea.

The governor also addressed the state’s unemployment claims processing system during his news conference.

The state has been taking the system offline over weekends to process claims. Over this past weekend, it paid more than $450,000 in claims, he said.

Before that, state records showed, it had paid 656,635 claimants more than $1.5 billion.

“I would tell people, check the bank account as this day goes on. There’s a whole bunch of money going out with direct deposit,” the governor said.

DeSantis said he has extended, until the end of the month, his waiver on the requirement to certify claimants remain unemployed, to ease pressure on the system.

“Even in Phase 1, it’s not like the economy is 100 percent back. But then, two, we really want the system to process as many claims as possible. If you have 500,000 people going on just to do that when we know they’re probably still unemployed, it’s probably better to waive that for the time being, further waive it, and really focusing on the processing.”