Fact-checking Nikki Fried’s attack on Ron DeSantis about taxes

Democrat Nikki Fried said Florida has had a history of Republican governors who pass legislation that hurts people’s pocketbooks.

Gov. Ron DeSantis recently "signed a $1 billion tax increase on the people of our state, on our consumers, yet gave a $500 million tax break to our corporations," Fried told WINK TV. "That's not how government is supposed to work. Government is supposed to work for the people."

Fried’s statement criticizing DeSantis for the tax increase has been a familiar talking point. In a video in April, Fried said, "Last night Ron DeSants raised your taxes by over $1 billion. And he did it right before midnight, with no cameras, no one watching." (His press office announced the bill signing  in an email at 11:23 p.m.)

The state estimated that its new law changing online sales taxes will generate an extra $1 billion per year, bringing Florida in line with the rest of the country. 

Technically, the online sales tax in Florida isn’t new. But practically speaking, it means that Florida online consumers will pay taxes on some purchases they previously didn’t.

The Florida Legislature passed SB 50 along party lines with Republican support. The new law requires out-of-state retailers and marketplace providers with no physical presence in Florida to collect Florida’s sales tax on items delivered to customers in Florida. The rule applies to sellers who generate more than $100,000 in sales in Florida. The bill takes effect July 1.

Florida levies a 6% sales and use tax on the sale of goods. Customers are required to pay the state for the tax owed on their purchase of an untaxed item. But hardly any did, according to a legislative staff analysis.

A 2018 U.S. Supreme Court decision — South Dakota v. Wayfair — paved the way for more states to collect sales taxes on online purchases. The court eliminated the requirement that a seller have a physical presence in a state to collect and remit sales taxes to that state. Following the ruling, states passed new laws to collect taxes on online purchases. Among states that levy statewide sales taxes, Florida was one of the last few states to pass such a law. 

"In the vast majority of states, the process of updating sales tax statutes post-Wayfair was noncontroversial, in large part because the tax that is being collected is not a new tax; it’s a tax that was already owed," said Katherine E. Loughead, an analyst at the Tax Foundation.

Business groups including Florida TaxWatch and the Florida Retail Federation had urged state legislators to pass such a law so that it applied equally to businesses operating inside and outside Florida that sell to Florida customers.

The money from the tax will initially go to replenish the state’s unemployment trust fund and then later will go toward reducing the commercial rent tax.

Jared Walczak, a researcher at the Tax Foundation, estimated that the law will cost online shoppers an added $40 to $50 a year, on average. 

In 2018 — when Rick Scott was governor — the Florida Legislature set in motion a corporate tax refund following the 2017 passage of the federal Tax Cut and Jobs Act signed by President Donald Trump. That federal law broadened the corporate income tax base by expanding the definition of corporate income while it reduced the corporate income tax rate.

Since Florida uses the federal definition of corporate income as the starting point for the state corporate income tax, the federal changes resulted in additional corporate income flowing through to Florida’s tax base, Loughead said.

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If Florida had adopted all the changes in the federal tax bill, it would have increased corporations’ state tax liabilities. 

In 2018, the Legislature passed a bill that would lower the corporate income tax rate for one year if net collections in 2018-19 exceeded forecasts by 7%. The bill required that any excess collections be refunded to eligible corporate taxpayers in the spring of 2020. Only about 1% of businesses pay Florida’s corporate income tax. 

Back in 2018, the state didn’t know how much money that would add up to — or that Florida would face the economic downturn in 2020 when businesses closed because of the pandemic.

So why does Fried imply that the corporate tax refund is the fault of DeSantis, who took office in 2019?

In the spring of 2020 amid the pandemic, Democrats asked DeSantis to cancel the refunds, estimated at about $543 million, to save the state money. 

"Refunding $543 million to corporations is a spending decision, and it’s a bad one at this time," said state Rep. Carlos Guillermo Smith, D-Orlando. "It should not be a priority of the leaders of a state that is worrying about how to pay for teachers, health care and transportation needs as our tax collections disappear."

But DeSantis remained committed to the corporate refund. 

"The corporate taxpayers who are entitled to receive these automatic tax refunds under the law have anticipated these refunds and have likely made business decisions around them," DeSantis spokesman Ryan Ash told the Orlando Sentinel in March 2020.

The refunds, issued in April 2020, benefited 19,546 taxpayers, according to a state Department of Revenue spokesperson. The average benefit was $27,793.49.

Fried said DeSantis "signed a $1 billion tax increase on the people of our state, on our consumers, yet gave a $500 million tax break to our corporations." 

In April, DeSantis signed an online sales tax law that the state predicts will generate an extra $1 billion a year. Online shoppers were supposed to be paying these taxes if they were not charged, but hardly any did. Florida’s new law puts it in line with other states that have statewide sales taxes.

The tax break refers to a bill the state Legislature passed in 2018, before DeSantis was governor, in response to the federal tax law. The bill resulted in refunding corporate taxes above a certain threshold so that their payments would remain roughly the same. Democrats called for DeSantis to cancel the refund, a request he denied.

Fried’s claims have an element of truth but ignore critical facts that would give a different impression. We rate this statement Mostly False.

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