Why Florida Has No Personal Income Tax, and What Pays the Bills Instead

Florida does not tax personal income. That choice, made a century ago and locked into the state constitution, shapes nearly every budget debate in Tallahassee.

The 1924 ban

In 1924, Florida voters adopted a constitutional amendment, proposed by the Legislature as Senate Joint Resolution 135, that barred the state from taxing inheritances or the income of its residents and citizens, according to Florida State University's constitutional history archive.

Backers argued the ban would draw wealthy newcomers and their money to Florida, the Florida Policy Institute writes. Newspapers across the state supported it, as did John W. Martin, who won the governor's race that year.

Corporations become taxable

Reubin Askew won the governor's office in 1970 promising a corporate income tax. He called lawmakers into special session to put an amendment on the ballot and campaigned for it, and voters approved it by about 2 to 1, WUSF reported.

The 1971 amendment narrowed the income tax ban so it applies only to "natural persons," allowing the state to tax corporations, according to FSU's archive. It capped the rate at 5% of net income unless three-fifths of each legislative chamber voted for more, and exempted at least $5,000 of taxable income. The rate stood at 5.5% before temporary cuts in 2019 and 2021 and returned to 5.5% in 2022, PolitiFact reported.

The sales tax takes over

Florida created its sales tax in 1949 at 3% on retail goods, with services excluded, according to a Mercatus Center analysis. The rate rose to 4% in 1968 and 5% in 1982. In 1987 the Legislature passed a broad tax on services, then repealed it within months and raised the rate instead. The rate reached 6% in 1988 and has not changed since.

What pays the bills now

The 6% tax applies to retail sales, admissions, hotel stays and commercial rent unless exempted, the Florida Phoenix reported. A House analysis projected sales tax would provide nearly 74% of state general revenue in the 2024-25 budget year.

Visitors cover only part of the bill. State economists estimated that in 2021-22, households paid 65.8% of sales tax collections, businesses slightly more than 18% and tourists 16.1%, the Phoenix reported. Documentary stamp taxes on real estate transactions and the corporate income tax are among the state's other revenue sources, Florida Trend reported.

How we reported this: This explainer was drafted with AI assistance from the sources linked above, and every fact was checked against those sources. See an error? Contact us and we'll correct it.

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