Pent-Up Demand Drives October Tax Revenue

By Jim Turner, The News Service of Florida

TALLAHASSEE — Florida for the first time since spring beat a monthly revenue forecast that had been in place before the coronavirus pandemic slammed into the state, according to an October report released Monday by state economists.

The report from the Legislature’s Office of Economic & Demographic Research indicated that general revenue taxes coming into the state during October were $35.4 million over a pre-pandemic forecast made in January. They also were $313.5 million above a forecast that was revised downward in August, giving the state three consecutive months of beating that lowered forecast.

“Given the nature of the fiscal shock, comparisons to the same month in the prior year produce the most meaningful metrics,” the report said. “In this respect, overall collections in October 2020 essentially match the collections in October 2019.”

Appearing in Kissimmee earlier Monday, Gov. Ron DeSantis said he expected to see an increase in the revenue numbers. 

“We’ve done better each and every month than was forecasted over the last four or five months,” DeSantis said. “And I think we’ll continue to see that. So, we want to keep that momentum going.”

The trend doesn’t wipe out the massive decline in tax revenue from earlier in the year — $1.8 billion between April and July — as businesses closed or scale back operations, travel halted and many people lost jobs or worked out of their homes because of the pandemic.

More than 90 percent of the October gains were from sales tax collections, with economists noting that this reflected “pent-up demand and some consumers’ ability to draw down atypically large savings that built up during the pandemic.”

The only over-the-year loss was found in the tourism and hospitality-related sectors. 

“Even though a significant part of the loss arises from a reduction in the number of out-of-state tourists, this category also includes sales to Florida residents at restaurants, local attractions and other leisure-based activities which have likewise been negatively affected by the pandemic,” the report said.

With tourism down 60.3 percent in the second quarter and 31.8 percent in the third quarter, the state Revenue Estimating Conference in August lowered the estimate of general revenue for this fiscal year by $3.4 billion, and another $2 billion for next fiscal year, which starts July 1.

Senate President Wilton Simpson, R-Trilby, warned during the Legislature’s organization session Nov. 17 that budget cuts will be necessary. But he said lawmakers do not need to raise fees or taxes if they can reach agreement on a new gambling “compact” with the Seminole Tribe of Florida or pass legislation that would capture sales taxes that often go uncollected on online purchases. 

“I can assure you, if you read tax law, it is not a tax increase,” Simpson said of online tax collections.

“We use the honor system to collect those taxes. If you think about all of our brick and mortars in this state that work hard every day, we put in rules in place, they follow those rules, they collect tax, and they send it to us,” Simpson said. “And then that same client or customer goes out to the internet and buys something, they still are the same taxes, we just use the honor system to collect that tax. And I can assure you, the honor system, that does not work very well.”

Similar efforts have foundered in past sessions among Republican lawmakers leery of appearing to raise taxes. 

A task force led by officials from Associated Industries of Florida, the Florida Retail Federation, the National Federation of Independent Business Florida and the Florida Restaurant & Lodging Association included the collection of online sales taxes in a list of proposals released Monday for the 2021 legislative session.

“Florida is one of just two states in the nation that has failed to modernize its laws since consumers began shopping online nearly two decades ago,” said the report from what has been dubbed the RESET Task Force. “We also are collecting data that suggests buyers were forced online during ‘stay at-home’ orders, which put brick-and-mortar businesses at a bigger disadvantage and led to both a loss of local sales but also a loss of sales tax collections in Florida.”

The groups backed online sales-tax proposals offered during the 2020 legislative session by Sen. Joe Gruters, R-Sarasota, and Rep. Chuck Clemons, R-Newberry, but the measures did not pass. On Monday, Clemons refiled the proposal (HB 15) for the 2021 session.

As for the compact, the Seminole Tribe last year made good on threats and quit a long-standing revenue-sharing agreement, which dropped at least $350 million into state coffers annually, after the demise of a potential deal they had reached with Simpson. DeSantis rejected the deal at the close of the 2019 legislative session, saying he needed more time to scrutinize the proposal.

Simpson has also suggested the state could raise state college and university tuition and for lawmakers to review recurring dollars going into projects such as an Everglades reservoir south of Lake Okeechobee.