FL House tees up $1 billion tax break for business at expense of consumers, unemployed workers

The Florida House debates legislation to steer $1 billion in online sales taxes to relieve businesses of higher unemployment taxes, on April 7, 2021. Source: Screenshot/Florida Channel

This may not be the year that Florida’s unemployment system — which failed epically under the weight of the COVID joblessness surge — undergoes a revamp.

Prospects seem dim, too, that Florida will boost joblessness benefits and extend the amount of time unemployed workers can draw benefits.

It definitely will be the year that the GOP-dominated Florida Legislature orchestrates a $1 billion tax cut for businesses paying into the Florida’s unemployment trust fund, the source of those benefits. Lawmakers will raise that money by enforcing Florida’s sales tax on online sales.

Those outcomes seemed assured following debate on the House floor Wednesday over the online sales tax, when Republicans voted down a series of Democratic amendments intended to ease the blow to consumers and improve the plight of the unemployed.

Rep. Carlos Guillermo Smith, Credit: Florida House of Representatives

“We are collecting taxes on consumers, and then we are giving all the spoils, all the benefits, over to businesses and employers. Members, that is totally unfair,” said Carlos Guillermo Smith, a Democrat from Orange County.

Democrats argued the money would be better spent on expanding Medicaid, raising educator pay for starting and veteran teachers, affordable housing, and other pressing state needs.

The House set up the legislation (SB 50) for a final floor vote, possibly as soon as Thursday.

There could be a chance that the Legislature will come to unemployed workers’ assistance. Legislation still pending in the Senate (SB 1906) would increase the weekly benefit from $275 to $375. Its Senate sponsors include Republicans Jason Brodeur, representing Seminole and part of Volusia counties, and Joe Gruters, of Sarasota and part of Charlotte County. Gruters also is chair of the Republican Party of Florida.

With the legislative session now in its second half, the bill drew its first committee hearing only last week. It passed the Commerce and Tourism Committee handily, but no hearing has been scheduled yet on its second spot, before the Appropriations Committee. Still, it’s not unheard of for the Legislature to rescue bills from obscurity as sessions wind down.

As for the online tax bill, the Senate had approved the measure about two weeks before but, because the House adopted a Republican amendment the bill has to go back to the upper chambers before it can go to Gov. Ron DeSantis. That amendment involves another business tax break — this one lowering the levy on commercial rents from the existing 5.5 percent to 2 percent.

Democrats did file legislation (SB 592, HB 207) to set weekly benefits at $500, rather than $275, and pay them for 26 weeks, rather than 12, more in line with the national average. The measures also would revise eligibility to cover layoffs of more types of workers and appoint an ombudsman to help Floridians resolve their problems with the system.

Neither bill has received the courtesy of a committee hearing.

Senate President Wilton Simpson and House Speaker Chris Sprowls are behind the plan to steer online sales tax receipts into the unemployment trust fund. Both relished the idea of collecting the extra money, given the damage COVID inflicted on state revenues, but wanted to signal that it wouldn’t amount to a tax increase. The gifts to businesses is a way out.

Some of the biggest industries in Florida have signaled support for the bill, including Associated Industries of Florida, Amazon, the International Council of Shopping Centers, the Florida Retail Federation, and the Florida Chamber of Commerce. So did the Florida League of Cities and Florida Association of Counties.

The Libertarian Party opposes the bill as interfering in commerce and a tax increase. Unions and social justice groups did, too, over its tax breaks for business and failure to boost the unemployment system.

Former Gov. Rick Scott while in office persuaded the Legislature to render the unemployment compensation system less worker-friendly by decreasing both the per-week benefit and the period when workers could collect. The system collapsed amid COVID-related job losses; the unemployed struggled with the state’s web-based filing system and many have yet to collect some or all of their benefits.

During Wednesday’s floor debate, Republicans bristled at suggestions the bill amounts to a tax increase. In fact, it merely improves enforcement of the existing sales tax on online sales and clarifies that sellers must collect and remit the money, rather than individual customers — many of whom don’t realize they are liable and subject to audits and possibly even penalties for nonpayment.

Sen. Chuck Clemons, a Republican from North Central Florida, on April 7, 2021. Source: Screenshot/Florida Channel

Pandemic demand depleted the unemployment trust fund, calculated by state economists at about $4 billion pre-COVID, leaving about $800 million to pay claims, according to Republican Chuck Clemons, who led the GOP debate on the bill. He represents Dixie, Gilchrist, and part of Alachua counties.

Replenishing the fund would require a 700 percent increase in the taxes businesses, large and small, pay to support the system, Clemons said. That increase took place on Jan. 1 but employers could draw refunds, he said.

“This would benefit everyone who is a job provider for the benefit of those people in the future that would lose their job, to guarantee that the benefit would be there for them,” Clemons said.

As they had done during committee hearings on the measure, the Republican majority voted down a series of Democratic amendments, including one by Orlando Democrat Anna Eskamani to use the new money to cut the sales tax to 5.75 percent, down from the existing 6 percent — “a tax cut that everybody gets a piece of,” as she put it.

Additional Democratic amendments would have spent the money on other state needs, including affordable housing.

Rep. Omari Hardy of Palm Beach County liked that idea better than giving it to business. He noted that Florida offers the stingiest unemployment compensation rates in the country and also requires the lowest business contributions to the system.

According to the Tax Foundation, which tends toward libertarianism, Florida’s unemployment system is the second-most friendly to business.

“We should use our common sense here; we should not be too clever by half and say that it’s more important to deliver a tax benefit to a narrow subset of Floridians as opposed to addressing this critical, critical need with respect to affordable housing,” Hardy said.