Florida has Some of the Lowest Tax Rates in the Country
According to the National Association of Realtors (NAR), more Americans moved to Florida in 2022 than to any other state, followed by Texas and North and South Carolina. While there are multiple reasons for this, it is undeniable that the low taxes are one of the primary drivers if not the number one factor. Indeed, people are moving to Florida in record high numbers. During these economically troubled times, Florida’s economy is far healthier than most other states, and the low tax and regulation burdens are likely the main reasons for this.
To begin with, Florida is one of only seven states in the country with no state income tax. The state also has low property and corporate taxes, while its sales tax rate is about average across all fifty states. In 1968, The Florida Constitution was ratified to prevent the state from collecting income tax. In 2018, Florida voters approved a constitutional amendment that requires the state House of Representatives and State Senate to have a two-thirds supermajority to increase any state tax or fee.
The state government spending per capita is among the lowest in the country due mostly to the fact that there are fewer state employees per capita compared with most other states. This limited state government spending helps the state have a budget that doesn’t require extra revenues that could be gained through an income tax or other state taxes.
Having no state income tax makes Florida particularly attractive to retirees, as none of their pensions, IRAs, or social security checks are taxed at the state level.
As if this were not enough, Florida abolished its estate tax, inheritance tax, and its gift tax in 2004. This makes the Sunshine State very attractive to families seeking to build generational wealth.
Florida does have a corporate income tax of 5.5%, but even this is the 16th lowest in the country when compared to all fifty states. The state’s low corporate tax rate serves to lure businesses to Florida, which in turn creates more revenue for the state.
In addition to all of this, Florida does not have a state property tax. Only the county governments levy a property tax, which makes up most of the county’s budgets. The national state median property tax rate is 0.97%, while Florida’s is 0.86%. But again, remember, these are local not state property taxes when we speak of Florida.
So, the question then becomes: How does the state collect enough revenue to function and provide vital services? The answer is mainly (though not entirely) through its 6% sales tax. But even the 6% sales tax rate falls right in the middle of the fifty states, higher than about half and lower than about half of the fifty states. Sales tax generates about 80% of the state’s revenue.
But it is important to remember that the sales tax falls disproportionately on tourists visiting its beaches, restaurants, amusement parks, and Florida’s many other tourist attractions. After all, tourists stay in hotels, rent cars, visit restaurants far more than the average Floridian. And the locals, far more than the tourists benefit from items that are tax exempt: groceries, prescription drugs, fertilizers, etc.
Florida is a tax friendly state because it generates its tax revenue primarily from consumption (sales) tax and local property taxes, and even these taxes are not very high. Despite being a state with no income, gift or inheritance tax, Florida is still able to generate billions in budget surpluses. It should, therefore, remain a top destination for migrants and businesses for years to come.