A new survey of corporate chief financial officers released by Alvarez & Marsal Taxand, LLC, a tax consulting firm based in New York, ranks Florida among the top three states with the most competitive business taxes.
According to the survey report, “amidst political, economic and regulatory change, CFOs say certainty in the tax code has become even more important than a reduction in corporate tax rates. While CFOs generally believe tax rates should be reduced to ensure the U.S. remains competitive in an increasingly global economy, when given the opportunity to eliminate or significantly change one aspect of the tax code, most chose to increase certainty in the tax system. The vast majority also said that tax considerations have a direct impact on their business decisions.”
They report names Texas, Florida and Nevada as the most tax competitive states and California, New Jersey and New York as the least competitive states in which to operate. Florida has one of the nation’s lowest corporate income taxes at 5.5 percent. However, relatively few corporations actually pay this amount due to the generous availability of statutory exemptions, which the Florida Legislature has expanded over the past two years. For example, on March 28, 2012, Governor Rick Scott signed House Bill 7087, an economic development bill, which provided increased corporate tax incentives and expanded sales and use tax exemptions. Florida residents also do not pay any personal state income tax, which is attractive to companies that want to attract top national talent to their business.
On the federal level, the report goes on to state that financial executives from both large and small businesses view an effective tax rate of 20 to 25 percent as necessary to make the U.S. federal corporate tax rate competitive with global tax rates. Currently, the U.S. has a system of graduated marginal tax rates in place which produce an effective rate of 34-35 percent, although some have publicly criticized America’s top companies for paying much less than this by utilizing the complexities of the tax code to their advantage.
This sentiment was echoed by the U.S. Senator from Florida, Bill Nelson, who recently stated that “although we have the highest corporate tax rate, we rank around 18th out of 25 among developed countries in corporate tax revenue as a percentage of gross domestic product. I believe that we can actually cut the corporate income tax rate and improve tax fairness at the same time. That’s because, right now, some firms pay an effective rate well above 30 percent, whereas other corporations pay nothing at all.”