Florida has established itself as a mecca for people in other states to migrate to our state to establish a new residence. One reason is that Florida has no income tax, and we continue to be a relatively low-tax state overall. Florida is ranked 48th in the nation in the rankings for the lowest state taxes. Boring down a little deeper, we learn that Florida has an extremely low per capita state taxation, but local taxes are much higher.
Also, the state enjoys good financial standing, especially Florida’s debt position. The legislature established a six percent target for a debt ratio, and 2022 marked the ninth consecutive year that the actual debt ratio has been below six percent. In fact, Florida’s debt and debt service on the debt have decreased, and we have a year-end budget surplus of $22 billion.
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Even though Florida’s tax burden is low compared to other states, taxes imposed by local governments are much more burdensome. Local governments account for a majority of Florida’s total state and local tax revenue, the highest percentage in the U.S. at 22.1% above the national average. The state’s cities, counties, school districts, and Special Taxing Districts raise and spend more money combined than Florida’s state government.
Because we have no income tax, the state relies more heavily on “transaction” taxes than many states. But even then, Florida’s sales tax ranking has declined from 19th in 2006 to 40th in 2021.
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The red-hot housing market in 2021 drove up the Florida documentary and intangibles tax by 45%. This is one of the state’s primary tax sources.
Seven states do not impose a personal income tax; of course, Florida is one. Nationally, the average state obtains 40% of its revenue from personal income taxes.
The taxing and spending levels across our state vary substantially in different governmental jurisdictions. The local taxes being collected and spent in Palm Beach County are extremely high, both in comparative and absolute terms. Among the five largest counties in Florida, Palm Beach is ranked #1 in tax levies in five tax categories, #2 in six categories, and #3 in five categories.
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Florida’s state government seeks to keep its debt ratio low and its fiscal house in order by restraining the use of borrowed funds and “encouraging a revenue-producing economy.” We can measure the results of these efforts by tracking the state’s debt ratio. In the last fiscal year, the debt ratio was 3.78%, a decrease from the 4.3% ratio the preceding year. The state is considered very strong by the standards of the rating agencies— Florida enjoys the highest rating category by each of the three major credit rating agencies, which is a AAA General Obligation rating.
While outstanding debt at the state level is relatively low, it is higher at the local level. Florida TaxWatch states, “Florida’s local governments are carrying approximately four times the debt of the state.” The state of Florida manages its debt in a way that benefits taxpayers, and groups like BIZPAC should review and consider how to ensure that effective financial practices continue.
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