Florida sales tax collections from March are down by $770 million, according to preliminary reports. That’s about 25% less than state officials had projected for the month.
As shocking as the numbers are, things may be even worse for April. Walt Disney World and other attractions did not shut down until halfway through March. Also, the statewide shelter-in-place order was not issued until the beginning of April.
Reduced sales tax income, coupled with the expected decline in real estate values, will ultimately lead to higher overall tax rates as local governments attempt to replace lost revenues.
Sales Taxes are Crucial
Sales taxes are Florida’s most important tax revenue source. They account for nearly 80% of general tax revenues. When COVID-19 hit, people stopped traveling and spending, which created a dramatic drain on the state’s finances.
If the sales tax revenue losses continue, state lawmakers may be called into an emergency session to cut spending, raise taxes, or come up with a combination of the two in order to compensate for the revenue shortfall.
Florida has a safety net of roughly $4 billion to handle finances until the end of the fiscal year on June 30th. If reserves are heavily depleted, there will be less money to carry over to the next budget year that begins on
Florida received approximately $5.9 billion as part of the Federal government’s CARES Act. However, the funds cannot be used to replace tax revenues.
State legislators are hoping that the restrictions will be modified. Representative Travis Cummings told the Orlando Sentinel, “The revenue losses, whether it’s local government – state government – we’re hopeful that the feds continue to evaluate that. If that occurs, I’m not saying all our issues are resolved, I’m not saying we’re out of the woods yet, but that would go a long way in dealing with these losses.”