Approximately two-thirds of Florida's sales tax revenue is generated by households within the state, while tourists contribute around 16%, according to the most recent analysis by state economists. This annual report, prepared by the Office of Economic and Demographic Research (EDR), comes at a time when policymakers are debating whether to prioritize reducing sales taxes or cutting property taxes for homeowners. Florida imposes a 6% sales tax on retail purchases, admissions, transient lodging, and commercial real estate rentals unless specific exemptions apply. For the 2024-25 fiscal year, sales tax is projected to account for nearly 74% of the state’s general revenue.
Governor Ron DeSantis has expressed a preference for property tax cuts, citing the significant contribution of tourists and non-resident visitors, such as Canadians, to sales tax collections as a reason to focus relief efforts on Floridians. He has proposed a plan to provide an estimated 5.1 million residents with homestead exemptions a rebate averaging $1,000 by December, followed by a ballot initiative in 2026 to make the property tax cut permanent. DeSantis argues that reducing sales taxes would disproportionately benefit visitors and part-time residents rather than full-time Floridians.
On the other hand, House Republicans are advocating for an immediate reduction in the state’s sales tax rate from 6% to 5.25%. Their proposal, which aims to deliver more than $5 billion in tax relief, has already gained bipartisan support in legislative committees. House Speaker Danny Perez has emphasized that this plan could provide quicker financial relief compared to property tax measures.
The EDR’s latest report, based on data from the 2021-22 fiscal year, reveals that households contributed 65.8% of total sales tax collections, while businesses accounted for just over 18%, and tourists made up 16.1%. These figures have shifted over time; for instance, tourists contributed about 13% of sales tax revenue in 2016 and 2017. However, with Florida’s tourism industry experiencing significant growth in recent years, the share of sales taxes paid by visitors has increased. In contrast, EDR’s analysis from the 2019-20 fiscal year showed that households were responsible for more than 76% of sales tax collections compared to just under 12% from tourists.
Florida’s reliance on sales taxes has drawn criticism for creating a regressive tax system that disproportionately affects lower-income residents. Since sales taxes take up a larger share of income for those earning less, some lawmakers view efforts to address this imbalance as essential. Representative Anna Eskamani of Orlando has highlighted this issue, noting that any measures aimed at reducing the financial burden on lower-income Floridians would be a step in the right direction.
The debate over Florida’s taxation policies underscores broader questions about how best to balance economic growth with fairness in revenue collection. While DeSantis’ focus on property tax cuts aligns with his goal of prioritizing relief for permanent residents, House Republicans’ push for a sales tax reduction reflects an alternative approach aimed at delivering immediate benefits to all consumers in the state. Both proposals highlight different strategies for addressing Florida’s unique reliance on sales taxes as its primary source of revenue.