Corporate Close-Up: Corporate Income Tax Tug-of-War Possible in Florida After Mid-Term Election

Andrew Gillum, Florida’s Democratic gubernatorial candidate, recently proposed an increase in the Florida corporate tax rate. Even if Gillum is elected, a constitutional amendment, Amendment 5, on the ballot in Florida this year could make it very difficult for the state to impose a higher corporate income tax.

Gillum’s Proposal

Florida currently has a unique approach to corporate income tax. Corporations with taxable income in Florida are subject to an income tax rate of 5.5 percent. Florida also provides a corporate income tax exemption of $50,000. Gillum has proposed increasing the Florida corporate income tax rate to 7.75 percent and using the funds for education and to raise the salaries of teachers. His proposal would not amend Florida’s corporate income tax exemption. Ron DeSantis, Florida’s Republican gubernatorial candidate, has indicated that he does not support any tax hike.

Under Gillum’s proposal, Florida would have one of the highest corporate income tax rates in the Southeast, exceeding Alabama (6.5 percent), Tennessee (6.5 percent), Georgia (6 percent), Mississippi (5 percent), South Carolina (5 percent), and North Carolina (3 percent). Only Louisiana would have a corporate income tax rate that could be higher than the corporate income tax rate that Gillum proposes for Florida. Currently, Louisiana imposes a corporate income tax rate of 4 percent on the first $25,000 in income, 5 percent on the next $25,000, 6 percent on the next $50,000, 7 percent on the next $100,000, and 8 percent on taxable income exceeding $200,000.

Gillum’s supporters argue that Florida must invest in public education, public infrastructure, and affordable housing in order to attract companies to the state, and that an increase in the corporate income tax rate is a way to do this. State GOP officials argue that a corporate income tax rate hike will sour Florida’s image as business friendly either by driving corporations out of Florida and into neighboring states or by causing companies to cut jobs and cut wages.

Amendment 5

Even if Gillum is elected and the Florida Legislature supports a tax increase, the road may be bumpy if Amendment 5 passes. Depending on the composition of the state legislature, the requirements imposed by a constitutional amendment would make it more difficult to achieve a higher tax rate.

Currently, only a simple majority is needed in both houses of the Florida Legislature to increase any state taxes. Amendment 5 would amend the Florida Constitution by requiring a supermajority, or two-thirds vote, in both legislative houses before a state tax or fee can be imposed, authorized, or raised, and requiring any state tax or fee to be introduced in a bill that contains no other subject.

The amendment, which needs 60 percent approval from voters to be passed, has the support of DeSantis, while Gillum has not made any statements indicating his position. If Gillum is elected and Amendment 5 is also passed, then there will be another obstacle to implementing the corporate income tax hike, which will likely result in gridlock. 

Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: What effect, if any, might the election have on the Florida corporate income tax rate?

Get a free trial to Bloomberg Tax: State, a comprehensive research service that provides deep analysis and time-saving practice tools to help practitioners make well-informed decisions.