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Republicans push online sales tax hike in exchange for business unemployment tax cut

by | Mar 23, 2021


Florida’s Republican-led legislature is moving rapidly toward imposing a once unheard-of sales tax on goods and services bought online from out-of-state retailers like Amazon.com. The move would result in a tax increase for most Florida consumers, but would be offset by a corresponding tax cut on Florida employers who have to pay into the state’s unemployment compensation system.

Senate President Wilton Simpson, a Trilby Republican, said the tax hike proposal, coupled with the corresponding business tax cut, is a high priority for both he and Republican House Speaker Chris Sprowls, Both the lawmakers’ comments on the issue have been carefully focused on the benefits to Florida businesses.

The massive increase in unemployment benefits paid during the coronavirus pandemic caused a corresponding increase in unemployment taxes that hit Florida businesses this year. The state will likely be forced to hike those taxes even further as the pandemic continues, unless a new source of funding is found.

“It’s, I believe, probably the single largest tax break for small businesses that we would probably ever pass, $4.5 billion in the next four years,” he said.

But critics of how the unemployment tax cut would be funded, through the implementation of an online sales tax, point out the obvious: that even though consumers who buy from local Florida businesses might realize some benefit from the unemployment tax cut, the overall net to most Florida consumers who buy goods on the internet would amount to a significant tax hike. State economists project the online sales tax on out-of-state online businesses would be borne almost entirely by Floridians and cost about a billion dollars per year.

The compromise proposal involves a bit of political hocus-pocus that could backfire on Republican lawmakers when a new election rolls around and they are forced to explain why they voted to implement the new online sales tax to Florida voters. Being able to point to the corresponding tax cut to Florida business owners and a more level playing field for Florida merchants who complete online is a crucial election issue for many lawmakers.

Business groups have understandably urged lawmakers to implement the online sales tax in an effort to level the playing field between out-of-state online retailers, who can charge lower prices since they don’t have to collect and remit the sales taxes, and in-state businesses, who do. The economic fallout of the pandemic, and the dire financial circumstances surrounding many Florida businesses which are impacted by the unemployment tax hikes, may be enough of a justification for many Republican lawmakers trying to strike a balance between a strong state economy and Florida’s reputation as a low-tax state.

Meanwhile some Democrats suggest any new revenue collected from the tax hike shouldn’t be should be used to cut unemployment taxes, but instead should go toward increasing the $275 in weekly unemployment benefits. Florida ranks among the lowest amounts in the nation in benefits paid to jobless workers.

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