Big Profits, Tiny Taxes || Part 6
Originally published Dec. 11, 2019
In 1981, the Florida Legislature gave the banking industry a tax break.
The goal was to entice banks to do their international lending from offices in Florida. Those banks, the thinking went, would then have to hire more accountants, loan officers and other white-collar workers here.
But 13 years later, the federal government rewrote the nation’s banking laws to let banks start doing business across state lines. That led to the rise of big banks with branches around the country.
The federal changes also undercut the Florida incentive. Now, a national bank could get the Florida tax break even if it was doing its international banking in New York, San Francisco or some other part of the country.
A few years ago, state economists looked more closely at this flaw. They found that there were 15 banks claiming the Florida tax break -- and as many as nine of them were doing their international banking somewhere else.
A bill was filed to close the loophole. But the banking industry lobbied against it. In one hearing, the Florida Bankers Association -- whose members include Bank of America Corp., JP Morgan & Chase Co. and Wells Fargo & Co., among others -- warned that eliminating the tax break might slow the industry’s growth.
“If it goes away, at the very least it will not encourage new growth in this industry in Florida,” Anthony DiMarco, a lobbyist for the bankers group, testified during that 2013 hearing.
So the Republican-controlled Florida Legislature decided to leave the tax break unchanged -- and to continue subsidizing the out-of-state operations of a small handful of big banks.
Today, economists estimate this tax break costs the state $12.6 million a year. That’s enough money to pay 250 new Florida Highway Patrol troopers.
“That’s crazy,” said Kirk Stark, a professor and expert on state and local taxation at UCLA Law in Los Angeles.
It’s also not all that unusual. The international banking tax break is one of a number of old provisions in Florida’s corporate tax laws that are no longer working the way they were intended.
Yet they remain in place, year after year. One reason is that the corporations who benefit from these tax breaks lobby hard to preserve them. One of the state’s biggest business groups -- Associated Industries of Florida -- even announces each year, right before the Florida Legislature begins its annual legislative session, that it will oppose attempts to close any corporate income tax loopholes.
Read the rest of the story here.
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